YUM is Strong but Momentum is reaching a Peak

Published on Tuesday, 07 February 2012 16:54 Written by David Becker

New York, February 7^th (TradersHuddle.com) – Yum!  Brands (NYSE: YUM) reported earnings after the closing bell on Monday.  The company reported that it earned $356 million, or 75 cents a share in the fourth quarter, up from $274 million, or 56 cents a share in the same period a year ago. Revenue was $4.11 billion vs. $3.56 billion. The average estimate of analysts had forecast that the company to earn 74 cents a share with sales of $4.04 billion.

YUM stock price moved higher in after hours trading and continue to increase as the market opened on Monday.  The stock price is at an all time high, and should continue to maintain upward momentum.  Target resistance for the stock can be created by an upward sloping channel, which was created by the highs on October of 2010, and the highs in April 2011.  This channel creates a target range near $66 per share.  Target support for YUM is near the 10-day moving average near 60.78, and the 20-day moving average near 56.80.

The MACD (moving average convergence/divergence indicator) is surging higher, with the spread and the moving average of the spread widening to the largest level since 2010.  The multiple up days for YUM, is creating a relatively high index level. Momentum is reaching a significant level, which in the past has lead to a consolidation, but not specifically a large retracement. 

The RSI on YUM moved into the overbought region, pushing past the 70 level, as the stock generates strong upward momentum.  During the past 6 months the RSI has topped out at an average index level of 76, which was then followed by consolidation and a slight retracement.