UBER Is Looking Vulnerable

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After a false rally at the start of 2023, shares in Uber Technologies (UBER) began rising strongly in May.

That upmove came off the back of a big Q1 earnings beat that saw UBER gap higher.

By late July, the ride-hailing company’s stock price had doubled since early January.

But UBER’s rally came to an end with a Q2 revenue miss in early August.

As you can see in the chart below, UBER has been tracking in a sideways pattern from there.

So with UBER’s next earnings scheduled just a few weeks away, today I want to see what’s coming next…

Transitioning Pattern

Uber’s stock retraced at the end of last year. But UBER burst higher in early January.

Yet as the chart below shows, that initial jump soon reversed. UBER traded lower from February through April:

Uber Technologies (UBER)

Source: eSignal

That rally after UBER’s Q1 earnings coincided with two bullish signals…

1. The relative strength index (RSI) broke through resistance (green line) and gained traction in the upper half of its range. That’s where it remained until UBER peaked at “A.”

2. The 10-day moving average (MA, red line) broke above the longer-term 50-day MA (blue line), with both MAs then tracking higher.

But after peaking at “A,” you can see a clear change in our indicators…

The 50-day MA had been in a long-term uptrend since January. But it started trading flat. The 10-day MA also crossed the 50-day MA multiple times in both directions – a classic sideways pattern.

The other thing you’ll notice is the change in action from the RSI…

Since May, the RSI tracked close to or within overbought territory (upper gray dashed line) throughout UBER’s rally.

You’ll often see this when a stock is rallying strongly, as it reflects a high level of buying momentum.

After hitting its peak at “A,” though, the RSI retraced and has been tracking closely to the support/resistance level (green line).

The only exception was when UBER briefly rallied up to its lower high at “B.”

Yet it’s the most recent chart action that has really caught my eye…

UBER tested and held short-term support since August (orange line). But the chart shows that UBER recently traded below that level.

Take another look:

Uber Technologies (UBER)

Source: eSignal

And this happened right as the RSI broke back into its lower range.

So what am I looking for next?

Testing Support

The most immediate thing I’ll be watching this coming week is the action of the RSI.

If it continues to track in its lower range, that will drag UBER below short-term support.

A prolonged move by the RSI in its lower band could see UBER testing the $40 level.

Beyond that, the other thing I’ll be watching is our two MAs.

As I mentioned, the 10-day MA has been crisscrossing the 50-day MA in a common sideways pattern.

The 10-day MA breaking further below the 50-day MA (with both MAs tracking lower) would add further evidence of an emerging down move.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

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