Carvana Co (NYSE: CVNA) seems to be poised for a price surge as per its latest charts. Carvana Co., together with its subsidiaries, operates an e-commerce platform for buying and selling used cars in the United States.
The company’s platform allows customers to research and identify a vehicle; inspect it using the company’s 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few weeks. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
CVNA – Daily Chart
#2 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color). This typically indicates a bullish setup.
#3 Bullish Stoch: The %K line (blue color) of the stochastic is above the %D line (orange color) in the daily chart, indicating possible bullishness.
#4 Bullish RSI: The RSI is moving up after reaching oversold levels and is currently above 50 and moving higher, indicating possible bullishness.
#5 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. As seen in the weekly chart, the stock had taken support at the 23.6% Fibonacci support level as seen in the weekly chart. So, this seems like a strong support area for the stock. The stock is also trading above the longer-term moving average of 200-week SMA. This is also a bullish indication.
CVNA – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#9 Bullish RSI: The RSI is currently moving higher from oversold levels and nearing 50. This typically points to the possibility of a bullish reversal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of CVNA if it trades above the price of around $156.50.
TP: Our target prices are $164 and $175 in the next 3-6 months.
SL: To limit risk, place stop-loss at $152.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 5% to 12% in the next 3 to 6 months.
For a risk of $4.50, our target rewards are $7.50 and $18.50. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a high volume. 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.
Happy Trading!
Tara