Uber Technical Analysis Suggests 2%–5% Upside

Earlier today, we looked at Wall Street ratings for Uber Technologies stock (UBER). Now we’ll follow up with some technical analysis to see why UBER could jump.

UBER stock climbed 10 cents to $29.56 on 44.4 million shares traded during Friday’s session. Shares in the California-based company have been on the rise since Uber’s November 20 insider buying. Uber CEO Dara Khosrowshahi purchased 250,000 shares of Uber’s common stock at $26.75, bringing the total transaction value to about $7 million. Following this announcement, UBER stock was trading up roughly 5% on Wednesday. Then the stock gained another 2.3% during Friday’s pre-market trading session, after Stifel upgraded its rating on the stock.

In addition, options traders made some bullish bets in the November 22 trading session. So, in this article, I’ll turn to some Uber technical analysis and look at the recent options activity. Let’s see if the stock looks attractive at the current levels!

Analyst upgrade

Uber’s upgrade to “buy” from “hold” at Stifel from analyst Scott Devitt saw an unchanged price target of $34. Devitt thinks Uber is “turning the corner.”  Also, the analyst said Uber’s business fundamentals are “showing signs of sustainable improvement” while the current valuation “offers a more reasonable entry point.” 

Uber technical analysis 

Let’s start off by getting a better idea of what’s going on with Uber stock by turning to its technical chart. Technically speaking, several indicators tell us Uber stock is neither overbought nor oversold right now.

For instance, Uber’s 14-day RSI (relative strength index) value of 52.42 lies near the middle of the 30 and 70 thresholds. And we can see the same picture when we turn to the money flow index value. However, one notable item here is that both indexes are currently in an upward trend, which provides further momentum to the stock’s upward movement.

When it comes to Uber technical analysis, it’s also important to note that the stock’s lower, middle, and high Bollinger Band levels come in at $23.99, $28,84, and $33.7, respectively. Based on those numbers, we can conclude that the stock is floating near its middle Bollinger Band line. And that trend also means UBER isn’t overbought or oversold. 

Looking at the technical support and resistance levels, I think the stock could continue to climb toward a $31.00 price level. That level is the stock’s nearest resistance. If the $31.00 level breaks out, then $33.00–$33.50 comes into focus as a medium-term target for UBER stock. On the flip side, I don’t really expect to see the stock fall below its recent low of $25.58. 

Options traders’ bullish bets on UBER after the recent pullback

UBER’s $30.00 calls for expiration on January 17 have seen their open interest levels increase by over 4,000 contracts during the last trading session, bringing the total open interest to about 17,084. These calls traded for approximately $1.80 per contract as of Friday, November 22.

So to me, Uber is looking like a moderately bullish bet. Its open interest represents the total dollar value of about $3 million. Moreover, the stock would need to rise to $31.80 by January expiration to break even.

Additionally, the open interest levels for $30.00 calls that expire on November 29 saw significant bullish activity during Friday’s trading session. According to Barchart.com, the open contracts rose by 3,777 contracts to about 10,405. These contracts traded for about $0.50 per contract as of Friday, November 22. Therefore, a buyer of the calls would need UBER to climb up to $30.50 by the expiration date before they could earn a profit. From the current stock price, that rise would mean a gain of about 3%.

Finally, in Friday’s trading session, the open interest for the $29.50 calls that expire on November 22 rose by 1,723 contracts to a total of 3,935 open contracts. If you were to buy those calls, you’d want UBER stock to rise to $30.20 by the expiration date so you could break even. And that rise would represent a gain of 2.1% from the current stock price.

Our Uber technical analysis suggests that the options market is overall bullish on the stock. Moreover, based on the transactions I described above, options traders expect a 2%–5% upside in the coming weeks. Therefore, I think Uber stock is a great “buy” candidate at its current levels.