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Lyft Shares Doubled - Here's the Trade as Report Looms

Lyft stock has doubled from March but still has a long way to go to recoup its coronavirus losses. Let's look at the charts ahead of its earnings report.

Shares of Lyft  (LYFT) - Get Lyft Inc Class A Report have really struggled. As they have more than doubled from the March lows, that doesn’t seem true, but that figure masks the pain below the surface.

While the gain from the lows a few months ago may trounce the Nasdaq’s 60% low-to-high rebound, Lyft isn’t hitting new highs as the index is. The shares remain more than 40% below their February high.

The stock suffered a peak-to-trough decline of more than 73% from its February high to its March low.

Making all this worse is the fact that while the stock is still well below its February highs, it's 65% below its all-time high, set on its first day of trading back in March 2019.

With the recent rotation back into airline, cruise and casino stocks, the bulls were hopeful that Lyft would see some of that action, too. 

Perhaps Uber’s  (UBER) - Get Uber Technologies, Inc. Report post-earnings dip is keeping investors on the sidelines. The recent ruling on drivers in California likely doesn't help matters, either. Let’s look at the charts before the results come after the bell today.

Trading Lyft Stock

Daily chart of Lyft stock.

Daily chart of Lyft stock.

The charts for Lyft stock are not as straightforward as many would like. 

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Above is a weekly chart, which shows the shares just below the 10-week and 21-week moving averages. If one were to retrace the entire range, the 23.6% retracement comes into play just above current levels, at $32.03.

Ideally, bulls want to see a powerful push over this level and these moving averages, sending the shares into the upper $30s.

Why? Because we already know the quarter is going to be bad. We know that based on Uber’s results and the lackluster travel trends that persist amid the coronavirus. So a big rally on bad news would be bullish.

However, the $37 to $40 area is going to be a tough nut to crack — assuming Lyft stock can get there. 

If it does, it puts the 200-day moving average, 50-week moving average and long-term downtrend resistance in play (purple line). While $40 was support in 2019, it was resistance in June.

On the downside, the risk is more palpable. If Wall Street votes to sell Lyft stock as opposed to buy it on earnings, it could open up the potential for some selling pressure.

Below uptrend support (blue line) and the July low at $27.51 is on the table. Below that — a monthly rotation down — could put the May low in play at $25.19.

I generally prefer to wait until after earnings are out to make a move.

 Sometimes it results in all the potential being wiped out, but it keeps us from getting long ahead of a big drop or short ahead of a big rally.