GrubHub (NYSE:GRUB) just delivered a sumptuous quarter to shareholders and GRUB stock was rewarded big time. GRUB vaulted as high as $141.06, scoring a new record before profit-taking finally took a bite out of the gains. But the selling was a godsend. Spectators afraid to chase the food delivery company now have a classic buy-the-dip opportunity.
The weekly chart in GRUB stock reveals just how spectacular GrubHub has performed since going public in March 2014. Like many fresh IPOs, GRUB formed a multi-year base to find its footing before finally blasting to the sky. The July 2017 breakout was the gamechanger signaling the beginning of its rocketship rise. Since then, we’ve seen a quick 200% gain.
As with any persistent uptrend like this, earnings growth has provided the fuel.
The recent ramp and pullback are best seen on the daily time frame. Notice the groundswell in volume accompanying the jump and then the utter lack of significant selling during the retracement. Such a contrast is healthy and belies the underlying strength of GrubHub stock’s position. It increases the likelihood that the retreat is a garden-variety pause and not the beginning of something more ominous.
As far as support goes, the unfilled earnings in the $115 zone should lend a hand if we see further downside pressure. Additionally, old resistance in the same area, which kept a lid on the stock from March to July, should now change its stripes and provide support on any type of retest.
How to Gobble GRUB Stock
One way to wager the stock will stay aloft is selling slightly out-of-the-money bull put spreads. Such a tactic provides a credit at trade entry, which will be ours to keep if the stock cooperates. Sell the Sep $110 put while buying the Sep $105 put for a net credit of 75 cents.
The reward is limited to 75 cents, and the risk is $4.25. To minimize the damage if the stock sours, consider exiting on a break of support near $107.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
