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How to Trade Uber Stock After Earnings Dip

Uber shares are under pressure on Friday morning after delivering a mixed earnings result. Here's how to trade Uber stock from here.

Shares of Uber  (UBER) - Get Uber Technologies, Inc. Report are down about 5.5% on Friday after the company delivered a mixed quarterly result.

The company lost $1.02 per share, missing expectations by 14 cents. Revenue of $2.24 billion plunged almost 30% year-over-year but beat estimates by $60 million.

While it was a rough quarter due to the pandemic, investors are hoping that this quarter marks the bottom in terms of revenue impact. While travel trends rebounded notably from the April lows, they have seemingly plateaued as Covid-19 cases spiked in July.

The quarter wasn’t great -- and to be honest, Lyft  (LYFT) - Get Lyft Inc Class A Report is trading even worse on the day, down over 8% -- but investors are hoping the company can start to see some upside traction in bookings.

Unfortunately, without a notable improvement in travel trends and economic activity, Uber may have trouble seeing this influx of business. Let’s look at the charts, which are doing a surprisingly good job of absorbing Friday’s blow.

Trading Uber Stock

Daily chart of Uber stock.

Daily chart of Uber stock.

I don’t like to say anything in the stock market is easy, but on the plus side, the levels on Uber’s chart are very well-defined.

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Just ahead of earnings, Uber stock was starting to clear $34 resistance. In fact, it even closed above this mark on Thursday evening (with the results due out after the close).

If this was an ordinary technical setup, Uber stock would have been a buy in my book. With earnings, though, one can never accurately predict the reaction. In this case, the move is to the downside.

However, Uber stock has a bevy of moving averages in the $31.40 to $32.80 range. Finding support near the top-end of that range now, let’s see if shares can maintain above that zone.

If the stock cannot, it puts uptrend support (blue line) in play near $30, followed by a retest of prior resistance near $28.

Essentially, we are looking to buy a deeper dip in Uber, provided support comes into play. If that dip doesn’t come, it means the moving averages held up as support. Rather than gambling that they will hold right now, we are either looking for a deeper decline or a move over $34.

If Uber stock moves back over $34 and closes above this mark, it puts the June highs in play near $38. Above that and perhaps Uber can work on filling its February gap up toward $40.

In a nutshell, either Uber’s key moving averages hold up and Uber soon retests $34, or they fail and the stock will likely see $28 to $30. Wait for the market to tell you which.