YUM31st July - ABCD nearing completion. 50/60 level retracement at key monthly levels -69. PA needs to push above 75.97 to 78-127 fib levels. Look to Short -Put Calls
YUM trade ideas
12 Week Cup With Potential HandleYUM has been forming a cup for 12 weeks and has a potential to form a handle with overextended RSI.
YUM
Time has come to catch TP2 @ 96$...?YUM Brands reached the in my former Analysis mentioned TP1 (86$) . With Prices above 86$, TP2 (96$) can be aimed...let`s rock!
Former Analysis:
YUM BRANDS Falsebreakout- targets. 86/ 96$
Yesterday we saw a classical false breakout, a bull trap.
The shortterm Support @ 79.10 was a intraday fight. First it seemed, that the Support zone would turn into a resistance with generating the next sell-Signal.
But the opposite appeared: A bullish hammer was formed per Close. Today we can see a big upmove which beated the downtrend.
I see a classical 1-2-3 long pattern with tp1:85,5 / TP2: 86$
The requirement for this possible Szenario is that YUM will not close sustainable below the last "3"
YUM BRANDS Falsebreakout- targets. 86/ 96$Yesterday we saw a classical false breakout, a bull trap.
The shortterm Support @ 79.10 was a intraday fight. First it seemed, that the Support zone would turn into a resistance with generating the next sell-Signal.
But the opposite appeared: A bullish hammer was formed per Close. Today we can see a big upmove which beated the downtrend.
I see a classical 1-2-3 long pattern with tp1:85,5 / TP2: 86$
The requirement for this possible Szenario is that YUM will not close sustainable below the last "3"
Good luck :-)
BROKEN OPTIONS SETUPS AND THE ART OF PATIENCEPeople have frequently mentioned to me that they can't make iron condors work for them, primarily because a single broken setup can undo a long string of profitable trades. This, of course, is a true statement if absolutely nothing is done to attempt to repair these broken trades and get them back to at least scratch or, ideally, into profit. It's all a question of patience.
Here is one of my most patience-testing trades I've been diligently working since October 2015 earnings -- YUM. I'm showing only the original setup here, along with the "current state of affairs" (a July 15th 70/75/82.5/90 iron condor); there are a bunch of rolls in between. And, lo and behold, we're back to where we started with YUM price, although my setup isn't currently ideal to take advantage of it (the short call is right at where price is now). And even though the current setup looks "troublesome," I've collected enough credit with rolls to be able to contemplate getting out of this trade for scratch with the July 15th expiry (or even a small profit, depending on how patient I am).
This trade naturally presents an extreme example of how long it can take to work out one of these broken trades. It may take a few days to get the movement you need; it may take a few weeks; here, it's taking months. Regardless of how long it takes, however, a couple of factors and/or variables are constant -- patience and trade sizing. Going small on trades allows you to be able to have a bit of buying power tied up with messes like this while you continue to work and book profit on higher probability trades. Go too big, and you're losing sleep over one broken setup that you feel pressured to close early because you lack the patience to give it time to work out.
A Side Note: YUM isn't the most volatile underlying in the world the vast majority of the time, but implied volatility does ramp up a bit around earnings, so it's to your advantage to exercise patience and roll on these implied volatility ramp ups if you can, since you'll collect more premium if you do so.
UPDATE: YUM BROKEN IRON CONDORThese earnings plays gone awry usually involve long stories, since it frequently takes a bit of time with rolling, massaging strikes, and such to get the thing into a state where you can exit for at least a scratch.
On October 6th, I played earnings via a 2 contract 72/75/90/93 iron condor, for which I received a .94 credit. Price proceeded to breach the short side, but I closed out the call side for a .16 debit, and then proceeded to roll out the 72/75 short put wing to the Nov 27th expiry for a 1.25 debit, which I matched with an opposition call side slightly above the short put side (same expiry; 73/76) for a 1.74 credit. On Nov 24th, I closed out the call side for .64 debit, rolled out the short put side to the Dec 31st expiry for a 1.78 debit, and again matched it with an oppositional call side (Dec 31 75/78 for 1.66 credit) (so for the last two rolls I've basically been treading water, with debit received for the short put side roll about equal to that for the credit spread ). Truth be told, I had an opportunity to improve the short put side in early December when price broke 76, but wasn't paying attention ... .
In any event, with 10 DTE, I'm looking to close out the short call side here while I can for a profit, as I don't really want to be short call YUM at 75, since I'm generally bullish on the underlying, given the fact that it's their intent to spin off the Chinese business which, last earnings, was a drag on price ... . I'll then proceed to deal with the short put side of the setup as we get closer to expiration ... .
The Risk of trading Earnings - Bullish signal turns to a loss Earnings are high risk binary events.
Many traders try to time major directional earnings moves by using technical analysis (me included).
Although it often works, it sometime can end up with an unpleasant loss.
Before $YUM's earnings, I sent to the Elite Zone members a setup suggesting that $YUM could reach 92$ and complete a bearish Bat pattern (potential aggressive C scenario).
This aggressive C scenario, started around 76$, got some confirmation signals earlier this week as the stock broke out of a daily downtrend line and closed above several important SMA lines (I use these confirmation signals all the time).
It turned out that $YUM crashed 18% following its reports, way below the stop loss zone (near 74$), violating my setup.
Few after thoughts and conclusions:
1. Re-analyzing the chart confirmed the bullish setup. Sometime you get everything right and yet the result is a loss. It doesn't mean you've done anything wrong.
2. Accept the risk - Especially if you trade earnings! (high risk trades)
3. Use options to decrease your capital at risk (if you do not know how to trade options, learn.. don't use it without proper knowledge)
4. Shake it off! Losses are part of the game.
5. You will never win them all.
Hope that helps some of you.
Tomer, The MarketZone
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YUM 10/6 EARNINGS PLAYYUM announces earnings on 10/6 after market close, so if you're going to play this via an options setup, look at getting a fill for whatever you put on prior to the 10/6 New York close.
Ordinarily, I trade these using a short strangle or iron condor, with the short call/put legs at or around the 1 standard deviation line for the chosen expiry, which will either be the Friday immediately after the earnings announcement or the Friday thereafter if the earnings announcement is too late in the week to manage the trade post-announcement if necessary.
SHORT STRANGLE:
A short strangle is an undefined risk strategy that consists of selling a put and a call with the assumption that price will remain between the strikes of the put and call for the duration of the contract.
Oct 16th Expiry 74.5 Short Put/89 Short Call Short Strangle
74% Probability of Profit
Maximum Profit: $121/contract
Buying Power Effect: Undefined
Break-Evens: 73.29/90.21
IRON CONDOR:
An iron condor is a defined risk strategy that consists of a long put, a short put, a short call, and long call with the assumption that price will remain between the strikes of the short put and short call for the duration of the contract.
Oct 16th Expiry 72 Long Put/74.5 Short Put/89 Short Call/91.5 Long Call Iron Condor
70% Probability of Profit
Maximum Profit: $57/contract
Buying Power Effect: $193/contract
Break-Evens: 73.93/89.57
Look to take both of these trades off at 50% max profit ... . Should price breach one side or the other of your setup, look to roll that side out to a later option expiry for credit and, if possible, for an improvement of your strike prices.
Pulled back to test break out leveloptions looking for a $3.70 move by Friday. Big seller of the weekly 80 calls earlier
A stock to long in a strong/flat marketIt is important to watch what the overall market is doing for this setup to play out.
$YUM - A weekly view with Fib.Picked this idea up via Greg Harmon (dragonflycap.com). Instead of a Daily chart view, I looked at the weekly chart and plotted against the Fib from high in July to low in early-2013.
- Multiple resistant points shown at the Fib. 61%
- An entry is considerable if price breaks $74.40, Target at $78 even.
- Unable to call a Stop yet!
- Will continue to monitor...
YUM oversold weekly, above the cloudBounced off the Ichimoku weekly cloud on recent selloff. Showing oversold on CCI and stochastic as it has in the past. Will be watching if it pierces back through the cloud to the downside, would be out if it does. Would like to see if it can breakthrough resistance around 74.
Undervalue, Over value, or at Value?While Yum has been seeing there after tax profit margins decrease, there cash flow has increased.
Last month the stock dropped from the $81 range to the 68 dollar range in one month.
Which is what I would like to point out, because the free cash flow is at 865 million dollars.
Inside the green trend line, price has been at the $68 dollar range but the company had a lower cash flow even though it was increasing during that time. In hindsight, the cash flow is at discount to buy right now, meaning a conservative buy.
Now If price were to drop further and retest the $43 dollar range with a decreasing cash flow this would still be a good buy because, the company has shown that it can generate over 750 million in free cash flow at this price. The company has been able to generate over 750 million in free cash 2 times during the companies life time.
Now the best case scenario would be if price felll all the way to the $25 dollar range. Why?
Simple, at one time the company earned more then 650 million while also at one time the company
earned 70 million dollars in free cash flow, and the market respected the $25 dollar range after if had seen a decrease
in cash of 580 million dollars. Thats a half a billion dollars and the market didn't panic and close under the 25 dollar range, sure price did touch prices under it. However the market closed above or at that range.
When it comes to cash flow it is really the easiest to understand in business.
For instance, you work, you get paid, you pay bills, you save, at the end of the month you have money saved in your bank account.Then at the next month, you work, you get paid, you pay your bills, you save. Now your cash should be more depending if you saved or if something happened that caused you to spend your money.
That is what a cash flow is in business, if you take the time out, you can look at the market on bizbuysell.com and look for companies for sale. You can look at all of the companies in one sector and compare the cash flow from one company to another. buy doing so your able to see what is over priced and what is under priced and what is priced right.
In an essence that is the exact same thing in the stock market, however there just isn't enough companies with the exact market caps or cash flows to be able to compare to one another to find value.
Which is why you kind of have to use judgement on cash flow analysis along with technical analysis to find value.
