Fast food service operator Yum! Brands, Inc (YUM) is trading decidedly higher on the year, much like the consumer discretionary sector to which it belongs, and well, just about most other broader indices. Through a technical lens the stock experienced and passed in flying colors a couple of tricky passages in February and again in April, which further enhanced the bull case for the stock.
Through a long-term lens, note that the stock is well supported by its 2009 up-trend line and as of last week for the fourth time since April 2012 is bumping up against a significant barrier of resistance around the $74.00 mark. The more often a resistance level gets tested, especially in the context of a long and strong series of higher lows and higher highs, the better the chance the stock ultimately pushes past there. All of this now begs the question, will this fourth time be a charm?
Last time the stock attempted a breakout past this long-standing area of resistance, Yum! Brands, Inc (YUM) reported its earnings on July 10th and likely faked-out many a trader looking for a post earnings report rally. The stock however, while not breaking out, also didn’t fall very far but settled into a two week consolidation phase that last Friday, July 26th finally led to the stock’s latest rally into the $74.00 area of resistance. While a breakout isn’t recorded until we at least see a daily close past resistance, it is notable that the time between breakout attempts has significantly reduced, meaning that the stock is in a coiling-up process that now increases the odds of a breakout past resistance sooner rather than later.