UBER did not have the best run since its market debut. Price was slowly declining after IPO and the current market cap is $56.91B. After hitting bottom in March, investors became interested in buying the cheap stock. Most investment funds and banks have price projections from $45 to $54 since then. UBER has also started to diversify its business, going for UBER EATs to compete with other delivery giants in the big pandemic market, where grocery shopping got heavily shifted to online ordering and delivery. Today company announced that it is in talks with investors regarding a stake in its Uber Freight division, according to Bloomberg that cited people with knowledge of the matter. Potential to raise $500 million in a funding round that would value the freight division around $4 billion after the deal, the report said. Nothing has been finalized yet, so the whole deal could change or be scrapped. But shows UBER’s commitment to diversify. And news moves the stocks.
Technical analysis and Elliott Waves
Let us look at 1-hour chart for a technical view. UBER IPO opened around $45 in May 2019 and since then the price has been in a steady wave decline, an a-b-c pattern that bottomed at $13.75 in March this year after the pandemic sell off. As the stocks of the world steadily climbed higher on unprecedented financial stimulus, UBER rode the wave along with everyone else, enjoying a massive surge in stock price. Elliott wave count shows a clear 1-2-3-4-5 pattern ahead. We had a sharp bounce on wave 1 as investors rushed in to buy the stock on the cheap and a sharp wave 2 correction, followed by a bullish channel in wave 3. So far, the price finished wave 4, retracing a perfect 61.8% of wave 3 and just touching the end of wave 1. It shows great respect to EW rules. We also see a formation of the inverse Head & Shoulders pattern here with RSI divergence. Today at the close of the US session, UBER was priced at $32.79, also right on the cross of the 50SMA and 200SMA. The right shoulder of the pattern, or a corrective wave 2 within a bigger wave 5, is also a 61.8% retracement. More confirmation of a bullish move here is on the break and close above $34.50 resistance, that also serves as the neckline for the inverse H&S pattern. 2nd confirmation is the bullish breakout of the yellow downtrend line from the high of the $47.
Contrarian view and alternative count
On the contrarian side, this stock like all the others, depends on this year’s pandemic and stimulus. So far as the markets squeeze higher and everyone rides on the bullish train, there is little reason to see UBER tank again. However, if the markets fail due to risk off event like it did in March, then we can easily see lower levels on UBER. As you can see an alternative count in the chart above, this could still be a wave 4 not finished. Key support is $26 based on price action. If that level breaks, then price could go lower to retest fib levels. As far as fundamentals go, recent market activity shows unprecedented levels of FOMO in the market, clearly showing Greed at highest levels. This creates a danger for a massive sell off, should there be a strong enough trigger to cause panic that will then spread all over the equities market.