Uber stock hit new all-time highs earlier this year, but has now pulled back. The Daily Breakdown examines the setup as shares dip.
Friday’s TLDR
- Markets wobble after making new highs.
- Nvidia rallies on earnings, stock split.
- Uber stock is down 23% from the recent high.
What’s happening?
The S&P 500 and Nasdaq 100 hit new record highs powered by Nvidia’s 9.3% rally on earnings. The firm topped earnings expectations, provided upbeat earnings, and announced a stock split.
While there was a risk that shares could open higher and give up their gains — as it has done after two of the prior three earnings reports — it actually wasn’t Nvidia that faded lower…it was the rest of the market.
Known on Wall Street as a “sell the news” reaction, it’s what happens when a stock opens higher on good news and fades lower on the day, sometimes giving up all of its gains (and sometimes more) by the close.
That’s what happened to US indices on Thursday, with the S&P 500 and Nasdaq up 0.6% and 1.1% at session highs, respectively, only to finish lower by 0.7% and 0.5%.
That all said, remember that the volatility index — the VIX — was near multi-year lows and Thursday’s pullback came on very low volume. That’s not to say the dip can’t get worse, but so far, there doesn’t seem to be much panic.
Sometimes it can be easy to fall out of rhythm with the market and that’s okay; it’s natural. The key is not being so out of position and/or overleveraged when it happens that it creates substantial losses.
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The setup — UBER
Uber erupted off the Q4 lows, doubling to its recent all-time high of $82.14 made in early March. Now though, it’s pulled back 23% from those highs.
On the weekly chart below, notice how Uber is pulling back into the prior all-time highs and a key resistance area from early 2021.
While not visible on the chart, the stock’s 200-day moving average — a key long-term measure of the asset’s trend — is also in this area near $60.
A dip into the low-$60s could create an opportunity for long-term bulls provided that it holds as support. If it doesn’t hold, more selling pressure could ensue.
Options
On a dip, buying calls or call spreads may be one way to take advantage of a pullback. For call buyers, it may be advantageous to make sure they have adequate time until the option’s expiration.
For those that aren’t feeling so bullish or who are looking for a deeper pullback, puts or put spreads could be one way to take advantage.
To learn more about options, consider visiting the eToro Academy.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.