To The Moon

*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!

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

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