The Key Level DoorDash Has to Hold After Earnings Rally

DoorDash rallied hard Friday after better-than-expected earnings. Here's the level it has to stay above going forward.
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DoorDash  (DASH) - Get Report is proving its doubters wrong on Friday, with shares up nearly 26% after reporting earnings.

Those gains are sticking, too. At its highs, shares were up 27%. Bulls have to be excited about the move, as it has already inspired analysts to upgrade the stock.

The better-than-expected quarter is exactly what investors needed in this case.

At a time where there’s been a bear market in growth stocks, the market has had a tendency to sell stocks even on good reports.

Interestingly, DoorDash went public in the same week as Airbnb  (ABNB) - Get Report, which also beat revenue expectations, but is up just 2.5% on the day.

For what it’s worth, DoorDash hasn’t been an exception to the bear market either. Shares hit new all-time lows on Thursday, down 57% from the highs.

Can it break out of the downtrend with today’s rally?

Trading DoorDash Stock

Daily chart of DoorDash stock.

Daily chart of DoorDash stock.

After its IPO, DoorDash came down hard. Shares hit almost $200 on its first day of trading, then quickly traded down to the $135 to $140 zone.

From there though, the stock exploded to new highs, racing higher in January. But like most of the growth stocks out there, it couldn’t escape the selling pressure from mid-February.

Once it lost the $135 to $140 zone, this area tuned into resistance. You’ll notice that through the month of March and part of April.

On the plus side, DoorDash is reclaiming that zone on Friday. It’s also reclaiming a key VWAP measure, as well as the 10-day, 21-day and 50-day moving averages.

It’s now vital that DoorDash stays above this area. There are simply too many key measures and levels here that it needs to hold. If it can’t hold this area — say it closes below $135 — then there’s very little reason bullish traders should be in this name.

A close below that mark could put the post-earnings low in play near $123.50, but it could also put the gap-fill from Thursday in play should the selling pressure reaccelerate.

Over on Real Money, read what Bruce Kamich has to say about DoorDash's charts. 

On the upside, shares are struggling with the 61.8% retracement of the current range. A close above that mark puts $167 on the table, followed by a possible rally to $180.

The bottom line is simple, though: DoorDash must hold $135. Above that and it’s possible this name has seen the low. Below and it’s one I would avoid for the time being.