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Fan Yang

Finally a Price Top for Yum Brands Inc. (YUM) - Buy the Dip?

Yum Brands $YUM has been a very persistent bull, even when the general market was in contraction. During the 2 market downturns in 2018, YUM managed to stay flat and eventually pushed higher into fresh all-time-highs. However, it appears that the more recent market downturn in May is pulling down YUM from its new highs above $100 a share.

YUM Daily Chart

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Bulls Taking a Break:
- As we can see on he daily chart, YUM has been on a persistent albeit choppy uptrend after a period of consolidation in early 2018.
- In fact, YUM has been on a long-term bull trend since 2009. Since then, we only had one significant bearish correction in 2015 into early 2016. 
- More recently, we can see price pushing above $100 and cracking $104 before retreating. 
- Then we saw a lower high of $102 as well as a lower low developing during the 5/29 session as price drops below $100. 
- This looks like a material price top that might be part of a significant consolidation.
- I don't have any reason to believe YUM is turning bearish. 
- I can sideways market after a 10-month bull market.
- If so, I would assess YUM as neutral-bullish.
- In this scenario, there should be support in the $92.25-$94 area. 
- This area involves a support/resistance pivot area, a rising trendline, as well as the 200-day simple moving average.
- In a long-term bullish market like this, if the daily RSI dips below 30, we can say it is oversold.
- I would look for a bullish divergence between price and the RSI as the RSI falls to 30. 
- If $92 does not hold, a much more aggressive bearish correction could have the $85-$88 area (next support/resistance pivot) in sight.
- From these support levels, I think there is upside at least to $100. If the trend continues, we can see a break above $104-$105 towards $110. 
- I am considering an entry at the $93 area, but also want to prepare for the $87 area - essentially a $90 entry if both were to execute.

YUM Weekly Chart

(click to enlarge)

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