Uber - How to Trade the Stock as It Breaks Out

Uber had a tough 2019, with shares getting pummeled lower and lower. However, the stock looks much better on the long side. Here's how to trade its fresh breakout.
Publish date:

While the overall market started off the week lower, Uber  (UBER) - Get Report jumped on Tuesday, rallying more than 5% at one point during the session.

The move came after the company announced it will ditch its food delivery business in India. Uber sold the unit to a local rival, Zomato, but will retain a 9.99% equity stake in the company, currently worth about $300 million.

Uber continues to push for profitability, as negative free cash flow and net losses have weighed on the financials and investor sentiment.

However, a shift away from money-losing businesses has investors feeling more confident that Uber can become profitable sooner than originally thought. 

It’s also got the stock hitting its highest level since August, and has the Real Money team's attention too, as it chose Uber as its Stock of the Day.

Let’s look at the chart.

Trading Uber Stock

Daily chart of Uber stock. 

Daily chart of Uber stock. 

Uber bottomed in November, with buyers willing to step up around $26 and bid the stock higher. At the November low, Uber stock was down about 43% from its $45 initial offering price in May.

Now? Shares are up 43% from those lows with Tuesday’s breakout. Uber stock has been riding uptrend support (blue line) for several months now, bursting through downtrend resistance (purple line) and reclaiming all of its major moving averages.

It’s a totally different look for a stock that’s been dogged for months, making new low after new low. On Tuesday, shares jumped over $35, as the ascending triangle pattern - where uptrend support guides the stock price into a static level of resistance - played out for the bulls.

Investors will now want to see $35 act as support on a pullback. Below puts the 20-day moving average in play. If that fails to act as support - either on earnings, a market-wide correction or some other negative catalyst - look for uptrend support and the rising 50-day moving average to buoy Uber stock.

On the upside, shares are recoiling from the 50% retracement, at $36.31. Over that and $40-plus is technically possible. While shares are sporting an overbought condition (blue circle), that can persist for some time. In other words, it's something to take note of, but not necessarily take action on without another catalyst. 

The bottom line: Over $35 is bullish, while below this mark signals caution. Over $36.31 and Uber stock can gain even more momentum.