Yum China (YUMC) potentially represents a prime candidate for a Lazarus trade. By that, I’m not referring to exploiting a price discrepancy between two or more markets, primarily driven by information asymmetry. Rather, I’m using the term to refer to a more intuitive concept: after suffering a series of setbacks in the market, YUMC stock could be poised for a comeback.

Specifically, the justification for the contrarian trade stems from streak analysis, the process of examining how a security (or market) behaves following a series of consecutive gains or losses over a defined period of time. Instead of analyzing isolated price moves, streak analysis focuses on the sequence of outcomes to uncover behavioral patterns that may shift forward probabilities.

Unlike traditional indicators, which often treat each price move independently, streak analysis captures the emotional momentum embedded in consecutive wins or losses — momentum that influences trading decisions, risk-taking behavior and capital flows.

Put another way, streaks don’t just represent price movements — they’re psychological events. As a tradable asset ebbs and flows over consecutive time periods, the kinesis doesn’t merely chart a trajectory. Rather, it builds a narrative in the minds of investors, undergirded by emotions of fear and greed.

These emotions impact behavior, causing market participants to modulate their exposure based not on the underlying fundamentals but on the streak itself. Thus, the consecutive actions carry embedded sentiment and expectation, which may alter future probabilities.

For YUMC stock, the odds that a one-week hold will end positively are about 50/50 — 49.7% if we’re going to split hairs. Such a statistic provides neither the bulls nor the bears any real advantage.

However, the beautiful part here is that we’re not just discussing any given week but a rather “special” one.

Setting Up the Lazarus Trade in YUMC Stock

Among the top 200 securities that made Barchart’s list of unusual stock options volume, YUMC stock is one of the more compelling names. On Thursday, total options volume hit 4,062 contracts against an open interest reading of 63,685 contracts. This stat represented a 102.59% lift over the trailing one-month average volume, signifying substantial interest in trading activity.

In terms of the transactional breakdown, call volume reached 3,034 contracts while put volume came in at 1,028 contracts, yielding a put/call volume ratio of 0.34. That sounds bullish at first, although to be fair, options flow — which focuses exclusively on big block transactions likely placed by institutional investors — showed net trade sentiment of $96,400 below parity, favoring the bears.

It must be said, though, that through the holiday-shortened week ending April 17, net trade sentiment was overall positive and leaned decisively on the bullish side of the spectrum. And thus, the alpha wolves of the market could be tipping their hands that a comeback could be due for YUMC stock.

Adding to the speculation is the aforementioned streak analysis. With the ringing of the closing bell on Thursday, YUMC stock posted four consecutive down weeks. That’s a rare event, having only happened 12 times in the trailing decade. But the big takeaway is that 75% of the time, a reversal occurred in the fifth week.

If that wasn’t enough food for thought, YUMC stock — when scaled from a weekly view — is resting on its 50-day moving average, a key technical gauge. Call it coincidence but I think it’s significant that a highly probabilistic reversal event is materializing right on a key technical level.

If you’re the speculating type, YUMC stock is screaming for attention.

Aiming for a May Recovery

With the next available options chain expiring on May 16, those on the conservative side of the speculation spectrum may consider the 37.50/42.50 bull call spread. This transaction involves buying the $37.50 call (at an ask of $510) and simultaneously selling the $42.50 spread (at a bid of $180), resulting in a net debit paid of $330, the most that can be lost in the trade.

Should YUMC stock rise through the short strike price at expiration, the maximum reward is $170, or a payout of 51.52%. Since the median one-week return off a reversal of a four-week down streak is 4.33%, the short strike price of $42.50 is quite modest.

Ultra-aggressive traders could go for the 42.50/47.50 bull spread expiring May 16. This trade assumes that the optimists will drive the price toward the 200 DMA (when scaled for the weekly price view), which would make the spread fully profitable at expiration.

It’s a risky wager but with a payout of nearly 186%, it’s something to consider. Plus, because of the implications of the streak analysis, the profit of probability might not be as low as 32.4%. It could be surprisingly high, potentially making this call spread favorably mispriced.