The coronavirus selloff hit the restaurant industry hard. With stores closing to prevent the virus from spreading, the stocks of McDonald’s (NYSE:), Starbucks (NASDAQ:), Dunkin and the like all came crashing down. Yum! Brands (NYSE:) wasn’t spared either.
YUM stock has been losing ground since the summer of 2019, but it was the COVID-19 crisis that really scared investors. Between late-July 2019 and March 2020, Yum! fell from $120 to $55, losing 54% in less than a year.
However, as it often happens in the markets, the stock started recovering even before there was a solution to the crisis. Yesterday, Yum! closed at $91 a share, up 65% from the March low. What interests us is the Elliott Wave structure of this recovery. Let’s take a look at it below.
Yum! Bears Have Job to Do, before the Bulls Take Over
Corrections usually consist of three waves. The most common shape they take is the simple A-B-C zigzag. That is what we believe is now unfolding in Yum! stock. The decline to $84 in June must be wave A, followed by a recovery to $95.44 in wave B last month.
If this count is correct, wave C needs to complete the whole 5-3 wave cycle before the uptrend resumes. In most cases, C-waves breach the end of the corresponding A-wave. In addition, the support area of wave 4 is a natural target for the bears from here. This means a decline to $80-$75 is likely to occur before the bulls return. Once they do, targets above $100 a share would make sense.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.