TBI's Thoughts [1]: CVNA... Signalling a Pullback?

Hi everyone! I've decided to do a little rebranding here, so I've renamed the newsletter - it's now TBI's Thoughts!

In the first issue of this newsletter, I'll be updating my TA on a formerly ridiculed company that was trading as low as $3 just a few years ago:

Carvana Co. (NYSE: CVNA)

The weekly chart shows CVNA in a recovery pattern, with a rounding bottom pattern in the works. It has been trading in an ascending channel since 2023 with a series of higher highs and higher lows.

Interestingly enough, CVNA also has the RSI triangle pattern that we previously saw on SPY before it broke down into channel support. Notice the higher lows on RSI (in green) as well as the 4-legged bearish divergence (in red). Based on what SPY and CVNA (in 2021) have done previously, this favours bears.

On the daily chart, it is clear that CVNA is trading above the middle trendline in the upper end of the channel. The key level I'm watching to the upside is 159.02. Since CVNA closed with a hammer candle, it's possible we might see a short-term “M” pattern back into the aforementioned level. As for the downside, the key level I'm watching is the 38.2% Fib extension at 148.98. A breakdown and close below this level will very confirm the potential reversal setup.

So, what are the possibilities here?

If CVNA were to clear 159.02 and break out of the ascending channel, then it can push towards the next major level at 193.23, which is near the 50% Fib extension.

However, if CVNA continues to reject here, I'm looking for a move back into the middle trendline, likely that 129-134 area. Given the nature of the divergence, I am expecting a move all the way back down to the channel support, which would give me an extrapolated target around the bullish gap at 111.45. Anything below that is likely a discount.

Based on the technical setup available to me, I am leaning bearish here. Thus, I will reiterate the SELL rating I gave in my last newsletter on CVNA.

Sentiment: SELL

Summary (with Price Targets - NFA):

Top of the ascending channel (in yellow) with a triangle pattern spotted on RSI on both the daily and weekly charts

Could come back into 159.02 to form an “M” before heading lower, but will only see a move lower if it can close below 148.98

Extent of the RSI triangle suggests CVNA could see a deeper pullback towards the 111.45 bullish gap level by Oct-Nov

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