Yum! Brands (YUM) — This quick service restaurant operator has traded decidedly higher this year, much like the consumer discretionary sector to which it belongs, and well, just about most everything else. The stock passed a couple of tricky technical passages in February and April with flying colors, which further enhanced the bull’s case.
Through a long-term lens, note that the stock is well supported by its 2009 uptrend 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 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 time be a charm?
The last time YUM attempted a breakout past this long-standing area of resistance, the company reported earnings on July 10 and likely faked out many a trader looking for a post-earnings rally.
The stock, however, while not breaking out, also didn’t fall very far. Instead it settled into a two-week consolidation phase that led to the latest rally into the $74 area of resistance on Friday.
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 been 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.