Can Uber Stock Continue Higher as Grubhub M&A Talk Swirls?

Speculation about an Uber-Grubhub tieup continues apace. The reaction among investors has been bullish. Will it stay that way for Uber stock?
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Uber  (UBER) - Get Report shares began the week lower after Friday’s 6.3% gain. The prior rally came on renewed talks of an all-stock deal for GrubHub  (GRUB) - Get Report.

Reportedly, the two are working on details for a termination fee, leading investors to believe that the other major details have been hammered out. If true, a deal could be close.

A combination between the two would make sense. Uber has seen plenty of growth from its UberEats unit, but profitability and competition are tough. Combining with GrubHub — assuming regulatory hurdles can be cleared — makes sense for both parties.

That’s particularly true with Uber’s Ride unit continuing to grow and with management looking to turn profitable by the end of this year. That timeline may be pushed out due to the coronavirus, but it’s clear why a deal makes sense for both companies.

The question is, can Uber stock continue to rally on that news?

Trading Uber Stock

Daily chart of Uber stock.

Daily chart of Uber stock.

Uber stock made a massive move higher off the March low. That’s not unlike Lyft  (LYFT) - Get Report or even the overall stock market. But its continued resilience has been very impressive.

Shares then pushed through $28 resistance and after reporting earnings in early May, the stock began a new and equally impressive uptrend (blue line on the chart).

Now with the stock above all its major moving averages and testing the 78.6% retracement — the latest mark of resistance — the bulls are looking to see if they can push it higher.

Given that many of the details for a deal with GrubHub have leaked and given the willingness of both companies to seemingly get a deal done, we’re seeing investors' reactions reflected in the stock price. That is, they are bidding shares higher.

Should that lead to an even higher push, look for Uber stock to break out over the 78.6% retracement and push into the February gap between $38.20 and $40.70. Above that puts the 2020 high near $42 on the table.

If the reaction is bearish, a break below the 20-day moving average would put the $30-to-$31 level back in play. That’s the rough area that holds the 50-day and 200-day moving averages. 

Holding these marks would be a sign that despite the short-term dip, bulls are still in control.