Uber Stock Enters New Uptrend

Uber Technologies, Inc. (UBER) stock struggled badly in the second half of 2019, dropping more than 40% into November's all-time low in the mid-$20s. A mild uptick into year end has picked up steam this January, attracting impressive buying interest that has lifted accumulation readings to new highs. This turnaround marks a sustainable bottom, setting the stage for an eventual test at the post-IPO high and breakout that opens the door to significant gains.

Sadly, Uber's good fortune hasn't helped rival Lyft, Inc. (LYFT), which continues to trade perilously close to the sell-off low posted in October. In addition, accumulation readings have barely budged so far in January, indicating that market players have now picked the winner and loser in the ride-share war. This limp performance also adds to legitimate concerns that Lyft will need to find an attractive suitor to improve its long-term viability.

Chart showing the share price performance of Uber Technologies, Inc. (UBER)

Uber Technologies came public to great fanfare on May 10, opening at $42 and closing out the first session slightly under that price. Limited buying interest took control through June, lifting the stock to an all-time high at $47.08. It broke down from a small triple top pattern in August, slicing through the IPO opening print in a downtrend that carved a series of lower highs and lower low into November's all-time low at $25.58.

Two rally waves into year end recouped the majority of losses posted in the final downdraft, while price action in the first two weeks of January completed the round trip. The on-balance volume (OBV) accumulation-distribution indicator surged to a new high at the same time, confirming a major bottom. The uptick has now reached resistance at the September high, increasing the odds for a pullback that could offer a low-risk buying opportunity.

A downtick should find support at the loosely aligned 50-day exponential moving average (EMA) and rising trendline of higher lows in the low $30s. That looks like a great price to take long-side exposure, with excellent reward and close placement of a stop loss under the trendline. The subsequent bounce could gain momentum into the closely aligned .786 Fibonacci sell-off retracement level and IPO opening price, marking the next stage of a bullish assault that eventually posts new highs.

Chart showing the share price performance of Lyft, Inc. (LYFT)

Lyft entered the public exchanges about six weeks prior to Uber, opening at $87.24 and dropping like a rock into the mid-$60s. A four-day bounce failed in the mid-$70s, setting off a secondary decline that found support in the upper $40s in May. The stock turned higher into the summer months, but buying pressure fizzled out at new resistance in the $60s, giving way to a small-scale triple top breakdown in August.

The decline eased quickly into a descending channel, dropping 45% off the mid-summer peak into October's all-time low at $37.07. A bounce into November stalled at the May low, signaling a continued downtrend, while price action into mid-January has carved a shallow decline that is crisscrossing the 50-day EMA. Accumulation readings have barely budged during this period, establishing a bearish divergence with Uber's bullish buying interest.

Lyft stock is now engaged in a third attempt to mount resistance in the mid-$40s. Bullish sentiment should improve greatly if that happens, raising the odds for continued upside into the $60s. However, committed bears remain in charge at this time, exposing a downdraft that could test and potentially break the October low. In turn, that event would raise new questions about the company's ability to make money and survive in coming years.

The Bottom Line

Uber stock has lifted into a new uptrend, while rival Lyft continues to grind through a persistent downtrend.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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