Uber (NYSE:UBER) shares haven’t been spared during the market crash. From peak to trough, Uber stock fell 27%, with the majority of the damage inflicted over four trading sessions. It was a nasty plunge, to be sure, but I actually like how well it has held up over the past few trading sessions. I think this could be a buying opportunity if you want to own the company long-term.
Let’s take a look at the price charts to build our case.
Uber Stock Charts
Although there isn’t much data to chew on due to its relatively short history as a public company, the weekly chart is instructive. It succinctly summarizes the stock’s fall from grace last summer and the subsequent recovery, which finally painted the bigger picture bullish.
Support zones usually don’t matter in the face of a market meltdown, but UBER stock did find buyers at a logical spot — its 20-week moving average. Last week’s close above this line in the sand helped keep the bullish thesis alive on the weekly time frame. Although it was nasty, last week’s whack failed to push the RSI much below the 50 zone. As such, I’d say this momentum indicator is still providing a green light to bulls.
It’s also worth noting the snapback kept Uber stock above the 61.8% retracement level of its Oct-Feb advance. Pullbacks that fall below this level usually inflict too much damage into the trend to make me interested in buying the dip.
Daily Time Frame
While the retreat wasn’t too bad on the weekly time frame, the daily trend definitely reversed lower. Uber quickly cracked the 20-day and fell well below the 50-day before finding support near $32. The past five candles have all seen higher lows reflecting an increase in demand. Furthermore, each has ended with long lower shadows or wicks, which reveal five consecutive intraday bullish reversals.
That type of resiliency should embolden those looking to shop this sale. Wednesday’s rally jammed the stock above short-term resistance at $34, but failed to close at the high of the day. I also like the volume patterns of late. The distribution seen during last week’s distress was far less aggressive than that of most other stocks. And, we’ve even seen a couple of accumulation days in the mix.
My biggest concern for bull trades here is the multiple overhead resistance zones. Both the 50-day moving average and an old floor that will likely turn into a new ceiling sit near $36. This makes me prefer a less aggressive leaning strategy like naked puts.
The Trade: Sell the April $30 puts for around $1.00.
Consider it a bet that Uber stock will sit north of $30 at expiration. The profit is limited to $100 per contract. If the stock sits below $30 come April expiration, you will be required to buy 100 shares per contract at an effective purchase price of $29.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits. As of this writing, he did not hold a position in any of the aforementioned securities.
