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Can Lemonade Traders Squeeze More Gains Out of the Stock?

Lemonade stock has been on a monstrous run. Is more upside on the way or is it hitting a temporary top?

While not as controversial as a stock like Tesla  (TSLA) - Get Tesla Inc. Report, Lemonade  (LMND) - Get Lemonade Inc. Report has certainly found itself in focus over the past few weeks. 

The bears are growing frustrated that the new issue has climbed so far so fast. Bulls continue to champion the stock, even after its monstrous run.

Lemonade stock has notched a new high for four straight trading sessions, including Tuesday. That’s surprising to some investors, given that the company announced a secondary offering.

The stock was up almost 3% at one point on Tuesday after opening lower by more than 7% and falling more than 9% at the lows. Currently, the shares are down 3% to 4%. 

Now the question becomes: Will investors drink in the secondary and squeeze this stock up to new highs, or is the short-term high in place?

Trading Lemonade Stock

Daily chart of Lemonade stock.

Daily chart of Lemonade stock.

After a solid run in early December, Lemonade stock consolidated into support at the 10-day moving average before igniting higher

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The stock topped out at $137.30 — the high for the month and for 2020 — before consolidating again. This time, though, the consolidation took the form of a tightening wedge.

Once Lemonade stock blasted through wedge resistance and the prior 2020 high, it quickly raced up through the two-times range extension and temporarily cleared the 261.8% extension.

Now the stock is struggling with that 261.8% extension, which is reasonable after such a massive run.

From here, I want to give Lemonade some time to digest this latest rally. Keep in mind: The shares are still up almost 50% from the close on Jan. 6 and that’s after the stock rallied more than 76% in December.

On the downside, let’s see how the stock handles a pullback to the 10-day moving average. If it’s support, bulls could see a strong bounce.

On a break of the 10-day moving average, look for a retest of the 2020 high at $137.30 and/or a test of the 21-day moving average, whichever comes first.

Should the shares take out the 261.8% extension and this week’s high at $188.30, then $200 and the three-times range extension at $201 are in play.