My Watchlist [82]: CVNA... Pulling Back to 57.19? (SELL)

*TA as of 29/3/24

Hi everyone! I’ll be updating my TA on a stock I deemed to be “extremely explosive to the upside” previously:

Carvana Co. (NYSE: CVNA)

Since the time I last posted on CVNA at the end of January, it has seen a 100+% gain to hit new 52-week highs at 94.04. However, I have reason to believe that the move up is weakening. Bearish divergence has begun to show up on the weekly chart, and the move up has been on declining volume. A lack of participation at and above the 23.6% Fib extension at 91.64 (assuming swing low of 3.55, which is the last major low and a swing high of 376.83, which is the ATH) suggests that there will be a pullback to retest supports further down. We also closed with a potential shooting star on the weekly, which is cause for concern - the last shooting star on the weekly that was printed in Dec’23 led to a 20+ point pullback.

Note that 57.19 was a major resistance level that we finally managed to break above earlier this year. However, CVNA gapped above this level without a retest. Given the prior relative strength of this resistance, the likelihood of a retest (S/R flip) is high.

On the daily chart, we can see that CVNA has been trading in a rising wedge up into major resistance. Likewise, there is multi-leg bearish divergence forming, suggesting a near-term retest of 82.25 (prior resistance). A breakdown of the rising wedge will be key for bears. However, given the relative weakness on the weekly and based on its historical movement, it is likely we will see a breakdown over the next 2 weeks.

What happens if we break below 57.19? Then a retest of 50.20 is most likely, which should coincide with a tap of the long-term trendline (yellow), which would present the best risk-to-reward buying opportunity on CVNA.

Given the likelihood of a pullback starting in April, a risk-off approach is preferred.

Sentiment: SELL

Summary (with Price Targets - NFA):

Potential shooting star reversal pattern on the weekly and a rising wedge on the daily with a measured move back to 57.19 (prior strong resistance)
Investors can consider trimming their holdings if they bought lower down (~40s) or buying protective puts to preserve capital
Despite potential rotation into small caps, CVNA has been largely tracking the market and should pullback together with the broader market (i.e. it appears to be a high beta play)

Alright, that’s all for this newsletter. Till next time!

$Carvana Co.(CVNA)$ $GameStop(GME)$ $AMC Entertainment(AMC)$ $Palantir Technologies Inc.(PLTR)$ $SPDR S&P 500 ETF Trust(SPY)$

@TigerWire @TigerEvents @TigerStars @CaptainTiger @MillionaireTiger

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My Watchlist [82]: CVNA... Pulling Back to 57.19? (SELL)

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