Food delivery startups have been on a growth tear for several years now. Competition has increased and that has hurt the share price of GrubHub (NYSE:GRUB). GRUB stock, however, has been showing much better signs of life again in recent weeks and looks to be pointing to higher levels still.
As long time readers of my column here know, I do not like holding trading positions through any given stock’s earnings report. Thus, please be aware that GrubHub is set to report its next batch of earnings on July 24.
The advent of modern smart phones has brought about the “sharing economy.” One of the services from this new economy is efficient food delivery from not just your favorite pizza chain, but from any restaurant imaginable. Each of these food delivery companies, like GrubHub has gotten itself some strategic alliances with large food chains, in addition to covering local restaurants and cafes. I find myself using these services ever more frequently.
GRUB Stock Charts
The food delivery mania in 2018 led to a huge surge in GrubHub stock, one that simply by the laws of gravity had to end. And end it did, as from its September 2018 highs, the stock fell 60% into the June 2019 lows.
By June, however, the stock finally reached its longer-standing up-trend and the lower end of the channel, as marked by the two black parallels. From a momentum perspective GrubHub stock had shown positive divergence from price (lower lows) to momentum (MACD in lower part of the chart making higher lows since early 2019). These are the type of formations I am looking for in order to see a stock establish a better lasting low.
In other words, the June 2019 lows around the $60 mark, which also coincides with the stock’s red 200-week simple moving average is an important line in the sand for the bulls.
On the daily chart, we see that since the first half of June, GRUB stock has gaped higher on two occasions. The first gap allowed the stock to push higher out of the falling wedge pattern (two long black parallels). The stock then consolidated for a few days, only to gap higher again on June 25. Since then, the stock has consolidated nicely in what we may refer to as a bull flag pattern. This pattern, as the name suggests, tends to resolve to the upside.
The next logical upside target for GRUB stock from here is the $82 area, which currently coincides with the stock’s red 200-day moving average. Active traders and investors could look to buy GRUB stock in a push above $78 toward said first upside target. This should do this while respecting any one day bearish reversal as a stop loss, and this is particularly true if this leads to the stock breaking back below $75.
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