Yum China Holdings Inc. (YUMC) has seemed to attract buying interest in the $33-$30 area since July and prices have broken out above the highs of November, but volume has not expanded enough so far this year to convince me that this current advance is durable. Let's look closer at the charts and indicators for Yum China, which earned a mention from Jim Cramer in his opening commentary.
In this daily bar chart of YUMC, below, we can see a downtrend until late December, when prices did not make a lower low. A higher high was not established until recently. There are a number of downside price gaps with volume spikes from last February to September. Since October the gaps have been on the upside, but trading volume has not been as intense as what was seen in the decline. Prices are now above the flat 200-day moving average line and the rising 50-day line. The 50-day line is not far below the 200-day line, so we could see a bullish golden cross of these popular moving averages in the days ahead.
The daily On-Balance-Volume (OBV) line shows an uneven rise from late July, suggesting that buyers of YUMC have been more aggressive. The OBV line has risen since late December, but the level of trading does not look like it has increased much. The Moving Average Convergence Divergence (MACD) oscillator crossed the zero line in late January for an outright go-long signal.
In this weekly bar chart of YUMC, below, we do not have a lot of price history to work with. Prices are above the bottoming 40-week moving average line. The weekly OBV line shows some limited improvement the past three months and the weekly MACD oscillator is improving but still below the zero line.
In this Point and Figure chart of YUMC, below, we can see a bottom pattern and a trade at $42 is needed for a triple-top breakout.
Bottom line strategy: YUMC has rallied about $10 in a short span of time and the volume behind this advance is not all that strong. I would take a cautious approach to trading YUMC from the long side for now.