Check Yum! Brands' Positive Charts Now

Shares of Yum! Brands have been on the rise since February, but can earnings momentum keep up with chart momentum?
By Richard Suttmeier ,

Shares of Yum! Brands (YUM) - Get Report have been recovering from a slump of 32.7% from its all-time intraday high of $95.90, set on May 20, 2015, to its 2016 low of $64.58, set on Feb. 11.

Since this low, the company appears to have resolved food-quality problems at its Kentucky Fried Chicken stores in China. Overall sales from its KFC, Taco Bell and Pizza Hut stores have also been improving, as families on Main Street seek cheaper fast food options. This demand was reflected by a positive reaction to earnings reported on April 20.

Yum! is still in the midst of separating its China operations from its core businesses. Investors will be evaluating guidance on these developments.

Analysts on average expect Yum! Brands to earn 75 cents a share when it reports quarterly earnings after the closing bell on Wednesday.

Here's how to trade Yum! Brands based upon daily and weekly charts and key technical levels.

Here's the daily chart for Yum! Brands.

Courtesy of MetaStock Xenith

Yum closed at $86.44 on Monday, up 18.3% year to date after a decline of 32.7% from its all-time high of $95.90, set on May 20, 2015, to its 2016 low of $64.58, set on Feb. 11. The stock has been a strong performer since Feb. 11, and is up 33.8%.

The daily chart shows the Fibonacci retracements from the May 2015 high to the February low. Since setting the low, the stock rebounded above its 23.6% retracement of $71.97 on Feb. 29, and above its 38.2% retracement of $76.54 on March 29. The stock was briefly above its 61.8% retracement of $83.94 on April 21, then dipped below its 50% retracement a few times between April 29 and June 28.

The stock moved back above the 61.8% retracement on July 6, and set a new 2016 of $86.60 on Monday. This makes the 61.8% retracement of $83.94 the key level to hold on a negative reaction to earnings.

Here's the weekly chart for Yum! Brands.

Courtesy of MetaStock Xenith

The weekly chart shows a red line through the price bars, marking the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average, the "reversion to the mean." The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicate overbought and readings below 20.00 indicate oversold. A negative weekly chart shows the stock below its key weekly moving average, with weekly momentum declining below 80.00 in a trend toward 20.00.

The weekly chart for Yum! is positive, with the stock above its key weekly moving average of $83.53, and above its 200-week simple moving average of $74.88. The 200-week SMA has been crossed several times between the week of Oct. 9, 2015, and the week of March 11, when this average was $73.13.

The weekly momentum reading is projected to rise to 72.51 this week, up from 65.66 on July 8.

Investors looking to buy Yum! should do so on weakness to $80.73, which is a key level on technical charts until the end of 2016.

The $84.59 level should remain a magnet through July.

Investors looking to reduce holdings should consider selling strength to $89.88, which is a key level on technical charts until the end of 2016.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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