The market has been pretty steady for UBER in 2021, but it looks like the bulls are starting to give up to the bears in recent months. Is the market finally fading the bounce we saw in May?
UBER Support Breakdown?
Today, we’re checking a potential play that’s available to most of you equity and CFD traders out there, and that’s the recent failure for UBER bulls to break above the broken major support area.
We can see on the daily chart above that throughout early 2021, the pair found strong buying support around the $52.00 handle. But sadly for the bulls, that level wasn’t able to hold off the bears in April as UBER fell with the rest of the U.S. tech sector on inflation fears.
The pair finally bottomed out around the $44 handle before starting its recovery in May which has taken the pair back to that $52 handle, but the bears seem to holding the line at the moment. With the pair now consolidating between $48 and $52, could there be another move lower ahead?
Well, the bullish case for UBER has been a mix of optimistic themes, including an autonomous future that would help get the company into profitability by reducing human driver costs, a strong hold on both the mobility (over 68%) and delivery markets (around 35%), and the likelihood it will continue to be a beneficiary from the global transition back to normal life from the pandemic.
But with UBER signaling in December that autonomous vehicles may not be close to ready yet with the sale of its self-driving-car unit, the regular round of negative cash flows is likely here to stay for a while. Despite having massive market share and revenue growth, it’s still a money losing machine as shown in the first quarter of 2021 with a net loss of $108M, even after the $1.6B gain from its sale of its ATG self- driving unit. Eeks!
And the competition going forward could eat into Uber’s future revenue. Not only is there a long list of ride sharing companies biting at Uber’s heels, but there are potential competitors from car companies that may jump into the space once they develop their own autonomous driving vehicles (e.g., Tesla, GM, Waymo, etc.).
So, there’s a lot to like from Uber as a bull, and a lot to hate if you’re a bear, both of which can’t be fully covered in this post. But right now it looks like the bears are winning as $52 is being a very tough nut to crack.
And if we see that tight consolidation around the $48 – $52 area break to the downside, it’s likely more bulls will question whether or not the pros out weigh the cons, and if there aren’t better places to get exposure to ride sharing, autonomous vehicles and delivery businesses. We’ll be watching out for that price action scenario for a potential short play for now, at least until we see catalysts that could shift the company’s profitability outlook match its revenue growth.
What do you guys think? Will the break in price support spark more bulls to bail? Or will the hopes of the pandemic recovery bring in more buyers at these lower prices?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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