The American online and mobile prepared food ordering and delivery marketplace that connects diners with local takeout restaurants, GrubHub Inc. (NYSE: GRUB) shows signs of an upcoming price surge according to its latest charts.
#1 Consolidation Area: The daily chart shows that the stock has been trading within a consolidation area for the past several months. This is marked in the daily chart in a blue color rectangle. Once the stock breaks out from this consolidation area, it has the potential to surge ahead.
#2 Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating the overall bullishness of the stock.
This indicates a possible bullish bias.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart.
This indicates possible bullishness.
#5 Low Volume Correction: The daily chart shows that the stock is currently correcting in low volume after forming a high-volume green candle, which is marked as an orange color ellipse. This indicates that the stock may soon surge again.
#6 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the daily chart. This usually indicates bullishness.
#7 Downtrend Broken: The weekly chart shows that the stock has currently broken out of its short-term downtrend and has started to move higher. The downtrend line is marked in orange color. This seems like a bullish indication.
#8 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern, which is marked in pink color. Once a breakout from a bullish pattern like a double bottom pattern occurs, the stock may move higher.
#9 Bullish MACD: In the weekly chart as well, the MACD line is currently above the MACD signal line. This is a possible bullish indication.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of GRUB if it trades above the price of around $61.50.
TP: Our target prices are $70 and $80 in the next 3-6 months.
SL: To limit risk, place a stop loss at $56.00. Note that this stop loss is on a closing basis.
Our target potential upside is almost 14% to 30% in the next 3-6 months.
For a risk of $5.50, our target rewards are $8.50 and $18.50. This is almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the consolidation area. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
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