Hamilton's E-Wave Analysis

YUM! Brands

YUM april 30 2015

For a count see our previous blog of mid 2013. It was at $75 at the time and has not moved all that much since. Again we think it is peaking perhaps for no other reason than that we simple cannot fathom why a restaurant chain called “Yum” should trade at 38x earnings. We know that Americans spend more disposable income eating out than they do in the grocery stores but from $10 to $80 in 11 years??

More importantly we noticed that on this stock both the and MACD, together or severally, are extremely efficient and accurate coincident indicators. Each and every time they alert you to a drop of about 10% and this time there is reason to believe that it may go quite a bit further.

This is option stuff. The stock should drop rapidly (say in 3 months) to the base of the last wedge, that is $66. A July 82.5 put is offered at $2.34. That option should be worth 4 to 6 times that at or before expiry. As always talk to your broker.  The same June option is offered at $1.40. Normally I prefer slightly longer options but this is one of those cases where shorter might be better, but consult with your broker.