In our previous update on McDonald's (MCD), we looked at the recent price action as a sign of bullish outlook. I think the technical picture is still bullish, but an Elliott Wave count and assessment of the short-term momentum suggest we might see some more choppiness first. MCD Daily Chart 1/24(click to enlarge)Elliott Wave Count:- As we can see on the daily chart, the rally from October to December has a clear motive or impulse wave structure (1-2-3-4-5). - If this is the case, we are in the corrective phase.- If we are indeed in a corrective phase, we should anticipate at least an a-b-c structure and we should not be surprised if the structure is even more complicated, like an (a-b-c-d-e) triangle, or falling wedge.- Along with watching the EW count, I will also be monitoring the RSI because I think it should hold above 40 or come back above 40 right away after a brief violation. This would increase my confidence of a bullish outlook. If the RSI drops below 40 on the other hand, I would shelf my bullish outlook.MCD 4H Chart 1/24(click to enlarge)Short-term Bearish Momentum:- Looking at the 4H chart, I would be expecting a wave C. - First of all, price action broke below a rising wedge structure, signaling bearish continuation at least in the short-term.- Furthermore, the RSI tagged 30, then held under 60 for the most part. This shows maintenance of bearish momentum, again in the short-term.120 and 122:- The only thing is, bulls are showing strength at 120.00, a psychological pivot. You can chalk that up as a psychological level that provided some technical support and shrug it off. I think if price holds under 122.00, we can shrug off the sharp buying at 120 as a technical order point with no follow through.In case you are not familiar with Elliott Wave principles, here's an excerpt from stockcharts.com that might interest you into learning more.Impulse Waves:The Impulse Wave is the kind we have been using so far to illustrate how the structure of Elliott Wave is put together. It is the most common motive wave and the easiest to spot in a market. Like all motive waves, it consists of 5 sub-waves; three of them are also motive waves, and two corrective waves. This is labeled as a 5-3-5-3-5 structure, which was shown above. However, it has three rules that define its formation. These rules are unbreakable. If one of these rules is violated, then the structure is not an impulse wave and one would need to re-label the suspected impulse wave.The three rules are: Wave 2 cannot retrace more than 100% of Wave 1.Wave 3 can never be the shortest of waves 1, 3, and 5.Wave 4 can never overlap Wave 1.(courtesy of stockcharts.com)The chart above shows an impulse wave. You have seen it before when discussing the motive wave. The goal of a motive wave is to move the market and an impulse wave does this the best of all the motive waves.Notice that Wave 4 does not cross into the price territory of Wave 2, and that Wave 2 does not correct below the beginning of Wave 1. Also see that Wave 3 is not the shortest.Although Wave 3 cannot be the shortest wave, it is typically the longest of Waves 1, 3, and 5 (and of all the 5 waves). It is the wave that is most likely to extend (covered in the next section).Sub-wave 3 of an impulse wave will always be another impulse type motive wave.Wave 2 cannot move below the beginning of Wave 1. Wave 2 is often known to retrace much of Wave 1, but if it retraces it completely, it is not a Wave 2. A break in price below the low of Wave 1 would invalidate the suspected wave-count and imply that one should look for an alternative way to label the pattern.Full Presentation of Elliott Wave Principles on stockcharts.com.