The support level’s confirmation in ARCO stock’s daily graph may not be enough for buying Arcos Dorados shares today. Consider the developing MACD divergence and oversold trading conditions indicated by RSI though and you can understand why I’m thinking of buying ARCO stock on today’s open. This is the second stock pick of this week following the AngloGold Ashanti stock tip on Monday, which looks promising having gained almost a dollar since my entry point. Hopefully investing in the McDonald’s franchisee will demonstrate similar results.
Although I base my stock trading decisions on technical analysis, I occasionally like to dig into a company’s financial data. Regarding Arcos Dorados stock I discovered that is a relatively new stock in Wall Street, since the ARCO initial public offering completed on April 13th, 2011. The first ARCO share was traded for $21 despite the IPO’s offering price of $17. ARCO stock printed an all-time high at $29.43 before it plunged to $12 in May 2012. The McDonald’s-branded restaurants operator missed 2 of the last 3 analysts’ earnings estimates and is reporting Q2 2012 earnings before market’s open on August 7th (EPS estimate is $0.07).
Looking at the stock graph it’s not difficult even for a beginner trader to evaluate the importance of the key support level at $12. ARCO stock first approached the level on 19th of May printing a long-legged doji candlestick followed by 3 consecutive rising ones. Buyers tried to push Arcos Dorados share price back to the 200-day moving average unsuccessfully and sellers once again took control of the market, pushing the stock lower. During Tuesday’s stock trading session sellers came short as ARCO stock gained 4.75% completing a bullish pattern. Meanwhile, the technical analysis’ indicator, called RSI, attests oversold market conditions, which is considered as a reversal signal. In case the trend continues till the end of the week, MACD divergence will also be confirmed increasing my confidence to buy ARCO stock.
Reasons to buy ARCO stock:
- Confirmed strong support level by doji candlestick.
- RSI below 30.
- MACD divergence.
Update 10AM ET: I’m now long ARCO stock.