If investors haven’t noticed, YUM Stock has had trouble with the quarterly earnings in not just this quarter but the last several quarters. The most recent estimates for July earnings once again ended up short within their growing base of restaurants in China. Yum Brands (YUM) same-store sales in China slid an estimated 13% in July which was worse than analysts had anticipated. This came on top of June’s estimated 10% drop. YUM Stock pulled back to $71.62 after hours, down about 3.83%.
Put Selling YUM Stock
I have been Put Selling YUM Stock for years with great success. YUM Stock has a great pattern and lots of volatility which makes Put Selling highly profitable. Investors remain enthusiastic about the prospects for YUM Stock so each time the stock pulls back investors jump in and push the stock back up. This pattern among investors has repeated itself since I started Put Selling YUM Stock in 2009.
With today’s after hours drop, YUM Stock is setting up for another possible round of Put Selling opportunities.
YUM Stock 6 Month Chart
The six month daily chart below shows two different support levels. The $70 strike level has some support although most of it goes back to just June and July. Meanwhile the $67.50 put has a lot more support and probably makes a better Put Selling trade. While the $67.50 premiums won’t be as lucrative as the $70 they are still worth considering. On Monday the $70 puts for September 21 expiry were trading for more than 1% and the $67.50 puts for about half a percent. With the decline in the stock overnight, the $67.50 put should be worth more. I will be looking at this put first thing in the morning.
Yum Stock Support With Volume
To assist in pinpointing the put strikes to consider selling against let’s add in the volume technical indicator. Once that indicator is added in you can see where a lot of investors have picked up shares over the past 6 months. Those periods when volume was above average are marked in the chart below with red circles. You can see how often the $67.50 valuation comes up in the chart below. There are a lot of investors sitting around that level.
Since May though, volumes have been lower as the stock moved higher. This was part of the reason I had indicated several times that YUM Stock was becoming overvalued and I had pulled back on Put Selling the stock.
Put Selling Summary of YUM Stock
With the July sales decline we could see the stock pull back into the $67.50 to $70 range. This would be excellent for returning to Put Selling at fair valuations within the stock. I will certainly be watching YUM Stock carefully. I won’t be surprised to see the stock pull back to the $67.50 level in the coming days and then move back up to the $70 to $71 levels again as investors certainly seem determined that every pull back in YUM Stock is another opportunity. I plan to be there once again when the next rally begins in YUM Stock but until then I am happy to be back Put Selling YUM Stock.
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