PreMarket Prep Stock Of The Day: Uber

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The price action in an issue following an earnings report is very important. The reason being fundamental investors and followers of technical analysis will use the price action to make longer-term trading decisions.

With that being said, Uber Technologies Inc. UBER is the PreMarket Prep Stock Of The Day.

Classic Reopening Play: Whether you like it or not, the pandemic has ushered in two new categories of stocks: reopening and stay-at-home issues. The price action in Uber since March 2020 clearly reinforces that concept.

After ending 2019 at $29.74, it peaked in February ($4.86) and came crashing down in March when it made a new all-time low at $13.71. It rebounded with the rest of the market, but it's no coincidence that the issue's best month ever was in November 2020, when Pfizer Inc. PFE, Moderna Inc. MRNA and others came up with vaccines for COVID-19.

Uber had already rebounded to end October at $33.41, rallied in November to $52.15 and retreated to end the month at $49.66 for a monthly gain of 49%.

Rally Overdone: The upward momentum continued into February when the issue finally peaked at $64.05 and reversed course. Ahead of the Delta variant, profit-takers came into the issue and the emergence of the variant accelerated the pace of the decline along with many other reopening stocks.

The reaction to the issue off Lyft Inc's. LYFT earnings report put additional selling pressure on the issue in Wednesday’s session. In fact, it made a new low for the decline at $41.37 and bounced to end the session at $41.81.

Q2 Report: After the close on Wednesday, Uber reported second-quarter EPS of 58 cents, which did not compare to the $(0.51) estimate. Quarterly sales of $3.93 billion beat the analyst consensus estimate of $3.74 billion by 5%. This is a 75.32% increase over sales of $2.24 billion in the same period last year.

PreMarket Prep Take: When both hosts of the show are in agreement on a trading set-up in an issue, it usually provides for a trade with a favorable risk-reward reward.

On Thursday’s show, the issue was trading at the $40 area and already had put in its premarket low ($37.90). It was concluded that the low may not be revisited in the regular session and that the $40 area may be a good entry point for a longer-term trade along with an appropriate stop.

“I do not have any exposure to the reopening trade and I need some," said Dick, who has a long position in Uber. “I will keep a close eye on the price action off the open.”

The full discussion on the issue from Thursday's show can be found here:

Price Action: After a lower open ($40.50 vs. $41.81), it immediately bottomed at $40.15 and reversed course.

As of 2 p.m. EST, the issue has reached $44.65 and has pulled back into the mid-$43 handle.