UBER Drives into a Wall of Resistance
Updated
UBER, a platform that provides ride hailing, food delivery, and package delivery as a service, started its downtrend before the major US equity indices. UBER's all-time high occurred on February 10, 2021, almost exactly two years ago. UBER proceeded to carve out lower highs and lower lows for quite some time afterwards, the very definition of a downtrend. But it has not undercut its June 2022 low yet.
Since the June 2022 low, UBER has formed a series of higher swing lows and higher highs. This forms an uptrend at an intermediate level of trend. However, this uptrend could be part of a larger-degree downtrend. For example, it could be a correction at a larger degree than the prior corrective moves within a downtrend. The downtrend in UBER might be just getting started with the move from the all-time high to the June 2022 low being the first major leg down. The corrective move could be the first major retracement (with all the other bounces constituting smaller degree corrective retracements).
To illustrate without getting into the nitty gritty of wave-counting (which often ends up wrong anyhow from this author's experience, which includes seeing EW experts' wave counts consistently being wrong and reworked), assume that the downward move from the all-time high to the June 2022 low is a larger-degree corrective wave A (which itself is composed of smaller subwaves within wave A that alternate between impulsive and corrective). If the downward move in UBER is a wave A (or wave W) at a larger degree of trend, then the current retracement could be a wave B (or a wave X) that retraces 38.2%, 50%, or 61.8% (or more perhaps) of the first major leg of the decline, the prior wave A in our assumptions. If this is case, a less steep downtrend line may be in the process of forming. But this is all speculation at this point. The macro environment, including rising terminal Fed Funds rates, gives a hunch that this might be the case, however. In short, UBER's upside breakout from its downtrend line may be part of a large-scale corrective retracement that sends price to new lows. This won't be clear until the retracement is more or less completed, and then the reaction lower either retraces that move or closes in on new lows. Traders don't necessarily need to know whether new lows are on the way to find levels where UBER could reverse and stall.
This analysis points to UBER's price reversing soon (in several days to a couple weeks). The rally is running out of steam. The first downside target is $32 (conservative), which may be reached by March or April 2023. Depending on how price behaves on the pullback, this post may be closed after the first target is reached. The second downside target is $27 (aggressive), and this will likely take a bit longer to reach than the conservative target, and this target is not viable unless the first target is convincingly reached and held (below). The final target would be the lows from June 2022 (most aggressive) at $19.90.
The main technical-analysis points are listed below:
Supplementary Chart A
Hypothetical price paths illustrating that price could bounce off parallel channel's support and continue its corrective rally, or it could break that uptrend and head to new lows
Supplementary Chart B
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Since the June 2022 low, UBER has formed a series of higher swing lows and higher highs. This forms an uptrend at an intermediate level of trend. However, this uptrend could be part of a larger-degree downtrend. For example, it could be a correction at a larger degree than the prior corrective moves within a downtrend. The downtrend in UBER might be just getting started with the move from the all-time high to the June 2022 low being the first major leg down. The corrective move could be the first major retracement (with all the other bounces constituting smaller degree corrective retracements).
To illustrate without getting into the nitty gritty of wave-counting (which often ends up wrong anyhow from this author's experience, which includes seeing EW experts' wave counts consistently being wrong and reworked), assume that the downward move from the all-time high to the June 2022 low is a larger-degree corrective wave A (which itself is composed of smaller subwaves within wave A that alternate between impulsive and corrective). If the downward move in UBER is a wave A (or wave W) at a larger degree of trend, then the current retracement could be a wave B (or a wave X) that retraces 38.2%, 50%, or 61.8% (or more perhaps) of the first major leg of the decline, the prior wave A in our assumptions. If this is case, a less steep downtrend line may be in the process of forming. But this is all speculation at this point. The macro environment, including rising terminal Fed Funds rates, gives a hunch that this might be the case, however. In short, UBER's upside breakout from its downtrend line may be part of a large-scale corrective retracement that sends price to new lows. This won't be clear until the retracement is more or less completed, and then the reaction lower either retraces that move or closes in on new lows. Traders don't necessarily need to know whether new lows are on the way to find levels where UBER could reverse and stall.
This analysis points to UBER's price reversing soon (in several days to a couple weeks). The rally is running out of steam. The first downside target is $32 (conservative), which may be reached by March or April 2023. Depending on how price behaves on the pullback, this post may be closed after the first target is reached. The second downside target is $27 (aggressive), and this will likely take a bit longer to reach than the conservative target, and this target is not viable unless the first target is convincingly reached and held (below). The final target would be the lows from June 2022 (most aggressive) at $19.90.
The main technical-analysis points are listed below:
- The yellow parallel channel defines the rally off the June 2022 lows. A convincing break below the lower edge of this channel will be good confirmation that price may retest (or break) the current lows.
- UBER is closing in on the top of this yellow uptrend channel where it is oversold within this intermediate-term uptrend. At prior tags of this channel's upper boundary, price has reversed. However, price can overthrow a channel boundary in its final move upward at times, so be alert to that possibility.
- In addition to being near parallel-channel resistance, UBER has traded into the center of a major support / resistance zone (now resistance, previously support) that goes back to UBER's first days as a publicly traded company. See the blue rectangle on the Primary Chart above.
- This blue rectangle of support / resistance also coincides with a key Fibonacci level (purple line) shown on the Primary Chart, the .382 Fibonacci retracement at $36.76, which was reached this week along with the blue rectangle. The Fibonacci / measured-move projection of 1.00 (where the first move off the lows equals the second numerically) lies at the blue 1.00 line at $39.58. This seems like a good spot for UBER to reverse. This area is highlighted with the larger teal-blue circle.
- Next is the Fibonacci 50% retracement of UBER's bear market at $41.97. Sometimes, when a move exhausts, an asset's price does a "throwover" above the top of a parallel channel. This is where price pushes to an extreme, often above the level of a return line—the parallel channel's top line. This is why it's never wise to do a YOLO play throwing all your chips in with leverage at one spot that seems like a reasonable reversal area. Throwovers and whipsaws occur. Markets surprise and inflict pain constantly. But the more precise the entry, and the more well-defined the risk, the better the approach.
- The last level to watch for a reversal, though it seems unlikely in this macro environment to be reached, is the .618 retracement of the entire downtrend. This level equals $47.18 and coincides with another Fibonacci level (1.272) at $45.91.
- SquishTrade expects a reversal soon. Whether UBER reaches new lows, or simply retraces to the lower boundary of its parallel channel, remains unknown. No bold predictions in that regard. However, price could do a couple different things on this pullback. It could retest lows or it could bounce off the lower edge of the parallel channel, which is an uptrend line (yellow parallel channels' lower uptrend line). See Supplementary Chart A below.
- Log-linear regression channel supports a downward bias here. See Supplementary Chart B below. But short traders may want to avoid shorting until price confirms the downside move. There are many ways to look for confirmation. One way might be to avoid shorting until price breaks back below the anchored VWAP from the all-time high. Another approach might be to look for a break back below a key support / resistance level on a daily close. There are many other approaches technicians and traders can use.
- Two of DeMark's indicators are approaching exhaustion on daily and intraday charts. Weekly charts require a few more weeks of higher highs before weekly exhaustion can be obtained, but that might not fully play out if price reverses at key technical levels before several more weekly up closes.
Supplementary Chart A
Hypothetical price paths illustrating that price could bounce off parallel channel's support and continue its corrective rally, or it could break that uptrend and head to new lows
Supplementary Chart B
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
UBER closed the day just below the major supply zone / resistance shown by the blue/teal rectangle. This was discussed as being an important zone when this was first posted. UBER will probably move in the same direction as the NDX so keep an eye on US indices. This resistance level needs to be overcome if UBER bulls want to push to the top of the parallel channel. But as shown in the post, the linear regression channel remains downward. And price is two standard deviations from the mean. So a mean reversion situation in the coming weeks / months makes sense. A better risk/reward short, however is from the $39.58 measured move level or the 50% retracement at $42.00.Note
UBER's price has fallen -9.2% since February 8, 2023, the date on which this post was first published and UBER traded at 36.83. SquishTrade noted that UBER was nearing or at exhaustion levels in its rally off the lows. Price fell -2.5% today as well.
A lower than expected CPI print tomorrow could see UBER return to the top of the parallel channel to retest highs and the areas of major resistance pointed out on the primary chart. Bears are not yet in the clear when it comes to shoring this stock as the uptrend off lows is still intact for now. Yet keep in mind the linear-regression chart shown above as well for a longer-term picture.
CORRECTION: The original post should have noted that UBER was reaching *overbought* levels (the post contained an error stating it had reached*oversold* levels, which is the incorrect descriptor). It was reaching *overbought* levels within its channel off lows, as well as overbought levels from a standpoint of the linear regression from the ATH (+2 SD above mean).
Note
UBER came very close to the conservative target of $32 today. This was about $1.49 above the target. It's intraday low was $33.49. But price rose well off the lows, suggesting a pause in the decline. The path of resistance is lower. Overly aggressive and leveraged shorts should probably take profits if they entered at higher levels and wait for a potential reentry.Conservative position sized shorts who have built up a sizeable equity cushion may want to see if price reclaims the $35-36 zone. This market is very tricky, so taking profits when one can is more prudent in this environment than a steady bullish uptrend with low vol.
Trade closed: target reached
SquishTrade
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