Main Street is undoubtedly looking forward to more normalcy in the coming year. But what about Wall Street and those gig economy or side hustle stocks that have helped so many people during Covid-19? Are they bound for financial hardships of their own making or will they continue to thrive? Let’s examine the price charts of three gig stocks for clues and offer risk-adjusted ways to make your money work harder for you and not the other way around.
Various kinds of gig stocks have boomed in 2020. The trend, of course, was already in motion. Rideshare driver. Last-mile logistics. Social media influencer. Dog trainer. The market was booming. People have been turning to the sector to make some side money, or as a full-time job.
But this year, unless you found yourself working at Zoom Video (NASDAQ:ZM), Amazon (NASDAQ:AMZN) or Clorox (NYSE:CLX), the pandemic may have introduced you to this type of gig work and some of the publicly traded companies which make this type of employment possible.
Pfizer (NYSE:PFE). And now Moderna (NASDAQ:MRNA). With them bringing up the U.S.’s first vaccinations against Covid-19, it’s only a matter of time until things get back to normal. Back to the ol’ 9–5 grind! Right?
It won’t be that simple.
Many businesses have closed their doors for good. Alternatively, many others have permanently rethought and retooled themselves so they can succeed without having to return to how things were pre-coronavirus. Also, the sad reality is it’s going to take months before the number of vaccinations allow for herd immunity. We’re still a ways away. Bottom line, many folks now working as independent contractors, freelancers or as their own boss are likely to remain in the gig economy.
While gig stocks stand to further benefit from a secular trend, as with any company’s shares, they’re prone to falling in and out of favor. But on select occasions, that price action should allow investors’ money to work harder for them if they know where to look. Here, I’ll show you some of the prime picks in these three leading gig stocks to buy.
Gig Stocks to Buy: Uber (UBER)
Source: Charts by TradingView
The first of our gig stocks to buy is rideshare and food delivery heavyweight Uber. With its business model, the outfit hasn’t managed to make ends meet, but its UberEats and the Uber Connect package service have served to keep its independent contractors much busier than otherwise during Covid-19.
Technically, UBER’s stock is crushing it relative to its closest rival Lyft (NASDAQ:LYFT), which was much slower to enter markets beyond rideshare. Currently, shares of this gig stock are pulling back after a solid rally sent Uber breaking out of a lifetime, slightly flawed “W” or double-bottom base.
The breakout looks great, but right now Uber’s weekly stochastics are overbought and bearishly crossed over. It’s fair warning. As such, the interpretation is to buy this gig stock on weakness in anticipation of a challenge of its prior highs and Fibonacci zone support.
Favored Strategy: Uber Stock Collar or out-of-the-money put spread.
Wix.com (WIX)
Source: Charts by TradingView
The next of our gig stocks to buy is Wix.com. The comprehensive website builder has helped many people open up their own shop with a stunning professional look that looks as though you spent a million bucks. Nope. But some of the businesses using its platform could be making a million or more.
Technically in 2020, shares powered higher from their March Covid low, but have retreated into a high-level “W” base since early August. With a supportive-looking stochastics setup on the weekly time frame, it’s not a matter of if, but when shares breakout of this powerful pattern. Moreover and as illustrated, investors can chose how they wish to operate their business with three distinct buy decisions within the base’s framework.
Favored Strategy: Intermediate-term, out-of-the-money long call.
Etsy (ETSY)
Source: Charts by TradingView
Our final gig stock to buy is of Etsy. The sell-your-own-wares outfit has seen business boom during the coronavirus. If nothing else, stay-at-home orders have allowed hobbyists to take their creations to the next level to make a buck — and sometimes a great deal more.
Technically speaking, a huge and nearly unobstructed run from its Covid-19 low has put shares clearly at risk of a pending correction. All stocks, even the best of the best, aren’t immune to periods of price pressure or time-based lethargy. Even Apple (NASDAQ:AAPL), the world’s largest company, is proof of that. Shares just broke out above a pattern mid-pivot over the past week after consolidating for more than three months while handily trailing the broader market.
Back to ETSY — with its obviously overbought monthly chart, a larger drawdown towards Fibonacci support would be welcome. That would provide a much better opportunity than chasing shares today. Still, if you’re the kind of investor that has to be in it to win it, don’t buy shares at any cost. Consider using a defined, reduced-risk and very adaptable collar strategy instead.
Favored Strategy: Out-of-the-money one- to two-month collar.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
