Trading Strategies For Lyft Stock Heading Into Q2 Earnings

Lyft, Inc LYFT is set to print its second-quarter earnings after the markets close Tuesday. 

The stock was popping up over 2% heading into the event, attempting to trade back up into a gap that was left behind when Lyft plunged following its fourth-quarter earnings print in February. 

When the mobility service and ride-share company printed first-quarter results on May 4, the stock plunged about 22% the following day and entered into a downtrend, which brought Lyft to a low of $7.85 on May 24. 

For that quarter, the company posted a top-line beat, reporting revenues of $1 billion compared to the $981.4-million consensus estimate.   

For the second quarter, analysts estimate Lyft will print a loss of 1 cent per share on revenues of $1.018 billion. 

From a technical perspective, Lyft looks set to trade higher, having regained the 200-day simple moving average (SMA). Of course, holding a position in a stock over earnings can be akin to gambling, as stocks can rise following an earnings miss and fall after reporting a beat. 

Options traders, particularly those who are holding close-dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility. 

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The Lyft Chart: Lyft fell under the 200-day SMA on Monday but on Tuesday, the stock was popping back up above the area and working to print a bullish engulfing candlestick, which could indicate Lyft will trade higher on Wednesday. The stock also back tested the 50-day SMA on Monday and Tuesday, holding above the area, which is bullish.  

• If Lyft suffers a bearish reaction to its earnings print and falls under the 50-day SMA on Wednesday, Tuesday's high-of-day will serve as a lower high, which will confirm a new downtrend. If the stock rises on Wednesday, bullish traders want to see the stock pop up over $13, which would indicate the recent drop was a bear trap and a new uptrend will be in the cards. 
• If Lyft receives a bullish reaction to its earnings and rises dramatically, the stock may find resistance at the upper range of a gap that exists between $11.76 and $15.99. If that happens, traders can watch for the stock to form a bearish reversal candlestick near $16, such as a doji or shooting star candlestick. 
• Lyft has resistance above at $12.79 and at $14.56 and support below at $10.70 and at $9.52. 

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