Is Unity Software making a $U-Turn Off The Lows? – August 5, 2021


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This is Scott with your Chart of the Day. I want to take a look at Unity Software ( NYSE: U ). I want to know if Unity ( NYSE: U ) is starting to make the turn off of its lows. As you can see, if I zoom out here, the stock IPO’d way back in September. It made a nice 50 percent run, pulled back, and then from that pullback ran just over 100 percent. It was a massive run ending in December.

Now, since then it has been consolidating and going through what IPO traders call the institutional due diligence phase. That’s when institutions really start to do their research and get to know a stock. While some of them may be taking part of a lot of this, for the most part, institutions want to get to know a stock and wait for this kind of phase of consolidation. That’s why we are seeing some nice tight ranges as potentially institutions are starting to take control of the float of the stock.

And so recently we can see how Unity ( NYSE: U ) made a nice move off the low here in May. It topped out at around 115.00, pulled back to the 50-day moving average, and has since just been consolidating right above most of the major moving averages with the exception of its newly developed 200-day moving average.

Now, if I zoom out here, we have a little bit of a cup, possibly a handle, and resistance right around that 111.80 zone. That zone back here in late June acted as resistance. We’ve pulled back, found support, and now we are right under resistance again.

What I want to see from Unity ( NYSE: U ), leading up to earnings coming up next week, is a move through 111.80, coming on higher than average volume. If that stock can potentially get above and stay above the 200-day moving average it might give you enough of a cushion to hold a small position leading into earnings as long as you have a stop-loss right around that 103.00 level. That is kind of where I see short-term support right now on this stock.

So I am going to set an alert right around 111.80 and see if we can break through that level and do it on volume. And again, it does have earnings leading into next week so if you don’t have a nice 10-15 percent cushion on the stock you probably don’t want to hold over earnings. As you know, earnings reactions have been kind of a mixed bag this time around.

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