After a promising rally faltered early this year, Uber Technologies (UBER) soon became stuck in a downtrend.

Then a surprise earnings beat in early May saw Uber’s rally kick off again.

When we checked in on UBER on May 16 (orange arrow in the chart below), it had gapped higher off those Q1 results. But it was showing signs of overheating.

Then after trading sideways in May, UBER broke higher in June. It recently traded at 18-month highs.

However, with UBER again looking overstretched, I want to see how things might play out from here…

From a Fresh Rally to 18-Month Highs

After losing around two-thirds of value from its 2021 high, UBER bottomed out in June 2022.

After a brief rally into August, it traded in a sideway pattern through the end of last year.

Uber Technologies (UBER)

Source: eSignal

However, as we came into 2023, a huge upswing in buying momentum caused UBER to surge…

By the time it peaked on February 8 (‘A’), it had rallied 50% in five weeks.

But the Relative Strength Index (RSI) made an inverse ‘V’ and reversed from overbought territory (upper grey dashed line), and UBER drifted lower as momentum sagged…

Then, after locking in a low at ‘B,’ UBER rallied strongly into its Q1 results.

That rally off ‘B’ coincided with two bullish technical signals…

1. The RSI broke through resistance (green line) and gained a firm holding in the upper half of its range. As the chart shows, that’s where the RSI has remained in this recent leg of UBER’s rally.

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

The RSI has tracked closely to the overbought line since UBER’s rally resumed in May. You’ll often see a pattern like this when a stock is trending strongly.

However, it’s the most recent part of this RSI pattern and UBER’s stock price that has caught my eye…

Take another look:

Uber Technologies (UBER)

Source: eSignal

While UBER has been making higher highs (upper red line), the RSI has been making lower highs (lower red line).

When the RSI starts trending lower like that, it eventually pulls the stock price lower too. That’s because it becomes increasingly difficult for a stock to rally (or even trade sideways) if buying momentum is steadily dwindling.

Now the RSI is back trading near support inside the orange circle…

So what can we expect from here?

Watch Out for Support

The most immediate thing I’m watching right now is what happens with the RSI around its support level.

For UBER’s rally to continue, we’ll need to see the RSI hold support and remain inside the upper half of its range.

If the RSI instead breaks through support and gets stuck in its lower range, UBER’s pullback from its recent June 28 high could gather further downward momentum.

This could soon see UBER testing $40.

The other thing I’ll be keeping an eye on is our two MAs. As I mentioned, both have been tracking higher.

However, if the 10-day MA rolls over on the back of declining momentum, that would add further evidence of an emerging down move.

The 10-day MA then crossing below the 50-day MA would indicate a bigger fall is likely in the cards.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

Mailbag

Several readers wrote in recently to share their experiences… If you’d like to send in a question or comment, reach out to feedback@opportunistictrader.com.

Hi, I joined over the Memorial Day weekend and placed my first trade the day after Memorial Day, 2023. Though I lost a lot of money in the beginning due to not understanding how this works, I’ve been extremely happy with this service.

We have been able to pull out $25K *in profits* to pay down debts, replace our hot water heater that went out, fix our refrigerator that was leaking, and make other repairs around our house. This has been amazing!

Both my wife and I are very pleased with The S&P Trader. Thank you so much, Larry! Keep it up, my friend.

– Rick M.

Hi Larry! Thank you for the update today… Of all the services I have, you are the only one who provides regular updates good or bad! I realize the market has been difficult and look forward to some P’s during the next six months! Thank you!

– David S.

I had a couple of rough months trying to blend the knowledge from BaseCamp Trading to day trading. June saw profits of $15,200 only trading 10 contracts at a time. Frequently choosing my own spread targets, sometimes following yours. Thanks and looking forward to the future.

– Thomas D.