Momentum Carrying UBER Shares Higher

Nov. 27th, 2020 Momentum Carrying UBER Shares Higher Dear Reader, On Wednesday, we looked at a Daily Price Chart of Sunrun Inc., noting that the stock’s 50-Day EMA is trading above the 100-Day EMA. For today’s Trade of the Day e-letter we will be looking at a Moving Average Convergence/ Divergence (MACD) chart for Uber Technologies, Inc. stock symbol: UBER. Before breaking down UBER’s MACD chart let’s first review what products and services the company offers. Uber Technologies, Inc. develops and operates proprietary technology applications primarily in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. It connects consumers with independent providers of ride services for ridesharing services, as well as connect consumers with restaurants and food delivery service providers for meal preparation and delivery services. The company operates through five segments: Rides, Eats, Freight, Other Bets, and Advanced Technologies Group (ATG) and Other Technology Programs. MACD Indicator confirms Price Momentum The UBER daily price chart below shows that UBER is in a price uptrend as the 12/26 day MACD line (black line) is above the 9-Day EMA (purple line). The Moving Average Convergence/ Divergence chart is shown below the daily price chart. MACD uses moving averages to create a momentum indicator by subtracting the longer-term moving average from the shorter-term moving average. The MACD is calculated by subtracting a stock’s longer term 26-Day Exponential Moving Average (EMA) from its shorter term 12-Day EMA. This creates the MACD line. MACD ‘Buy’ Signal The 9-Day EMA line functions as a buy/sell ‘trigger’. When the 12/26 Day MACD line crosses above the 9-Day EMA line it indicates positive momentum and higher prices for the stock. When the 12/26 Day MACD lines crosses below the 9-Day EMA it indicates negative momentum and lower prices for the stock. MACD is more of a leading indicator than a moving average cross over which tends to lag price movement. MACD Histogram shows Acceleration of Momentum Also included in a MACD chart is the histogram bar graph. This portion of the chart helps to illustrate the distance between the 12/26 Day MACD and the 9-Day EMA. When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 12/26 Day MACD and the 9-Day EMA and a slowing of the stock’s momentum. When the gap between the two indicators begins to narrow, this typically indicates a crossover of the indicator lines could happen soon. Buy UBER Stock As long as the 12/26 Day MACD line remains above the 9-Day EMA, the stock is more likely to keep trading at new highs and the stock should be purchased. Our initial price target for UBER stock is 54.60 per share. Profit if UBER Is Down 10% Now, since UBER’s 12/26 Day MACD is trading above the 9-Day EMA and the stock will likely rally from here, let’s use the Optioneering calculator to look at the potential returns for an UBER covered call trade. Covered calls are also known as buy writes. The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10% increase to a 10% decrease in UBER stock at option expiration. The goal of this example is to demonstrate the ‘built in’ profit potential for covered calls and the ability of covered calls to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike price used in the profit/loss calculation. The prices and returns represented below were calculated based on the current stock and option pricing for UBER on 11/25/2020 before commissions. Built in Profit Potential For this covered call, the calculator analysis below reveals the cost or the breakeven price is $4,237.00 (circled). The maximum risk for a covered call is the cost of the covered call. The analysis reveals that if UBER is flat at 50.80 at expiration the covered call will realize an $843.00 profit and a 19.9% return (circled). If UBER increases 10.0% at option expiration, the covered call will realize a $1,263.00 profit and a 29.8% return. And if UBER decreases 10% at option expiration, the covered call will realize a $335.00 profit and a 7.9% return. Due to option pricing characteristics, this covered call has a ‘built in’ 19.9% profit potential when the trade was initiated. Covered call trades can result in a higher percentage of winning trades compared to a directional stock trade if you can profit when the underlying stock/ETF is up, down or flat. A higher percentage of winning trades can give you the discipline needed to become a successful trader. The Optioneering Team is here to help you identify winning trades just like this one. Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Average Portfolio Return of 177.9% Below is a screenshot of the current open trade profit results from Chuck’s Inner Circle Trading Service. There are currently $577,397.93 in open trade profits with an average portfolio return of 177.9% demonstrating the ability of the Optioneering Strategy to deliver substantial returns with no losing portfolios. Happy Thanksgiving from the Hughes Optioneering Team! As a Black Friday discount, Chuck want to offer you a special deal. As a Trade of the Day subscriber, if you sign up and become a member of The Chuck Hughes Inner Circle Trading Service today, he will give you a discount on his premium trading service. Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing! Wishing You the Best in Investing Success, Chuck Hughes Editor, Trade of the Day © 2020 Tradewins Publishing. All rights reserved. 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