GrubHub Stock Breaks Out From Symmetrical Triangle

GrubHub Inc. (GRUB) shares soared more than 22% on Wednesday after the company reported better-than-expected second quarter financial results. Revenue rose 51% to $239.74 million – beating consensus estimates by $6.74 million – while net income of 50 cents per share beat consensus estimates by eight cents per share. The company also issued FY18 revenue guidance of $966 million to $983 million, which was well above the $960.45 million consensus forecast. On an operational level, the company reported a 35% increase in daily grubs and a 70% increase in active diners, which was also higher than expected.

Analysts responded favorably to the news. Craig-Hallum maintained its Buy rating on the stock and raised its price target to $160.00, which represents a nearly 50% increase from yesterday's close. (See also: GrubHub Stock Likely Under Accumulation and Heading Higher.)

Technical chart showing the performance of GrubHub Inc. (GRUB) stock

From a technical standpoint, the stock broke out from a symmetrical triangle and prior resistance to fresh all-time highs. The relative strength index (RSI) moved into overbought territory with a reading of 77.36, but the moving average convergence divergence (MACD) experienced an uptick. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend remains bullish.

[To learn more about supplemental technical indicators such as the RSI and the MACD, check out Chapter 4 of the Technical Analysis course on the Investopedia Academy.]

Traders should watch for some near-term consolidation given the lofty RSI reading, with $120.00 being the key support level to watch. If the stock rebounds from those levels, traders could see an ongoing move to fresh highs over the coming weeks. If the stock breaks down from trendline support, traders could see a move to retest lower trendline and pivot point support at around $108.00, although that scenario appears less likely to occur. (For more, see: 3 Small Cap Stocks That Can Thrive Amid a Trade War.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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