YUM | Yum! Brands Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. YUM is in focus today….

This journal entry looks at the recent market movements of Yum! Brands NYSE: YUM

VantagePoint Trading Journal YUM Update

Today is a lesson in position management. We highlighted a potential sideways to bearish scenario in YUM Brands (YUM) on 10-20.  We showed how we could take advantage of this “non-bullish” scenario by selling the November 3rd 76/75.5 call spread for $0.15.  Look at the chart today:

While YUM did see a short-term bearish trend, it wasn’t enough for the premium to be hit.

We can see how the bearish predictive crossover did in fact work. The issue was the premium in our call spread never came in enough for us to exit the trade. This is when you must identify your risk and act when the trade does not work in your favor. We had $0.35 of risk (we sold the $0.50 wide vertical for $0.15). My risk tolerance on a set up like this is that I am willing to risk up to a 50% loss.  That loss threshold was indeed met when the spread traded approximately $0.37. This is where one would exit to mitigate losses and follow one’s self-imposed risk tolerance.

VantagePoint Trading Journal YUM

The wider market continues to struggle as we close out another week. It’s determination to not point us in any given direction can be frustrating for traders. Unfortunately, it’s what traders deal with more often than not. What we are looking for is a potential weakness because the path of least resistance is up and the market simply will not take the next leg. Using the artificial intelligence forecasting software VantagePoint, we can analyze individual stocks, futures or ETFs and broad indexes like the S&P, Dow, and the Russell.  Let’s look at YUM! Brands (YUM) which is setting up for a “not bullish” scenario:

image of YUM trading diary with VantagePoint
A recent crossover of the blue predictive moving average below the black simple moving average indicates a potentially bearish scenario. That move is confirmed by the green neural index moving to the zero position, indicating weakness.

The artificial intelligence-based predictive indicators within VantagePoint showcase two significant things in this market. We see a bearish crossover indicator on 10/18/17 as the blue predictive moving average indicator line crossed below the black simple 10-day moving average. We also see the VantagePoint propriety neural index indicator moving from the one (1) to the zero (0) position. This indicator measures strength and weakness for a 48-hour period. The move to the zero (0) position indicates weakness and further makes the case for a potentially bearish scenario.

If one were a straight stock trader, simply selling YUM in the $75.50 area would be a possible play. In this scenario, it would also be prudent to place a stop order in the $77.00 area to mitigate potential losses while still accounting for traditional market fluctuation.

A play with options could also prove to be advantageous. Keep in mind that implied volatility is trading at the higher end of the spectrum for YUM. The 30-day implied volatility is trading in the 19% range.

Elevated levels of implied volatility mean more potential premium to collect. We have earnings coming up before the open of the market on 11/02/17 and we would like to not participate in any volatility associated with this report. So, we’ll consider the Weekly November 2nd expiration options.  Selling the Weekly 11/02/17 76.00/76.50 call vertical at $0.15 could be a prudent play. Our max risk is the width of the spread ($0.50) less any premium collected ($0.15) or $0.35. Our max profit is our premium collected. This is a relatively low-risk/lower reward scenario where to really get out money’s worth, we will have to take this to expiration and hopefully let the spread go to zero and collect our $0.15.

image of vantage point software banner


Leave a Reply

Your email address will not be published. Required fields are marked *

Translate »