I love it when I see a stock that has a good seasonal track record for the near future set up with a nice technical pattern. In the February 11th, 2015 Seasonal Forecaster newsletter, I covered Yum! Brands stock (YUM), saying
“Yum! Brands (YUM), parent of Taco Bell, KFC, and Pizza Hut restaurants, has an incredible seasonal track record. Over the next 15 weeks, YUM has risen an average 12.5%, with gains in every one of its 17 years! Assuming an option trader would need to see at least a 5% move for a typical option trade to work, there were only 2 years this trade wouldn’t have worked!“
“The stock has been working upwards, forming an up-trending channel:“
I continued…” YUM!’s fundamentals aren’t outstanding. I usually pick stocks with better fundamentals, but the retail eatery segment has been picking up strength, YUM has a new CEO and the stock is trending upwards, possibly from institutional accumulation, and it has a very strong seasonal track record.“
“Earnings are next due on Apr 22, so there is time for this trade to work. The trade setup is:“
YUM had no problem surpassing the December highs, the initial target for this trade:
The day before YUM! Brands earnings announcement on April 22nd, the stock was building strength and showing institutional accumulation. There was no reason to expect a disappointment from earnings.
While Yum! Brands announced first-quarter earnings that were down 8% from the year before, they reaffirmed the company was on track to deliver a 10% increase in earnings for the year. YUM jumped 4% on very high volume in response:
On April 24th I suggested subscribers who took the ‘alternative trade’, the YUM July 67.5 Call, should close the call position and book the current 127% profit. Our YUM stock trade was up 13.3% at this point – we would continue to hold that.
Our story isn’t over. On Friday, Daniel Loeb’s Third Point hedge fund reported they had taken a “significant share” in Yum! Brands. As reported by Reuters, Third Point stated that YUM! Brands has “turned the page on recent trouble in its Chinese business,” and that profit would recover dramatically over the next one to two years.“
YUM stock jumped almost 6% on Friday on volume more than 300% higher than average.
Our seasonality-inspired YUM stock trade is now up 23.8%, and some readers booked triple-digit gains on the alternative long call trade. As pullbacks occur, we may add to the position on rebounds or on new highs being set. But this one’s a keeper. And it was the strong seasonal track record that initially brought it to my attention. (Our Skechers trade, based on similar analysis, is currently up 37%, and two others are up 11.5% and 11.3%)
(stock charts are courtesy of Worden.com’s Telechart)
Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link:www.markettamer.com/seasonal
Copyright (C) 2015 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com.
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