Where Does an Extended Carvana Travel Now?
Carvana (CVNA) reported better-than-anticipated quarterly numbers Wednesday night and J.P. Morgan (JPM) upgraded the stock. CVNA gapped sharply higher Thursday as traders and investors reacted to the positive news.
Let's check out the charts and indicators for the online-only used-car retailer.
In the daily bar chart of CVNA, below, I can see a series of rallies and corrections as the shares moved higher in the past 12 months. The shares trade above the rising 50-day moving average line and trade at more than twice the level of the rising 200-day moving average line. Compared to the 200-day line CVNA is considered extended (overbought).
The On-Balance-Volume (OBV) line has quietly moved higher since November and supports the bull case. The Moving Average Convergence Divergence (MACD) oscillator just turned up above the zero line for an outright buy signal.
In the weekly Japanese candlestick chart of CVNA, below, I can see that share prices have turned upwards from a large base formation. The shares are trading above the rising 40-week moving average line.
The weekly OBV line is positive and bullish. The MACD oscillator is above the zero line.
In this daily Point and Figure chart of CVNA, below, I can see that the shares reached and exceeded a price target in the $96 area.
In this weekly Point and Figure chart of CVNA, below, I can see an impressive upside price target in the $224 area.
Bottom-line strategy: Because prices are extended (overbought) versus the level of the 200-day moving average line I would recommend that traders who may be long CVNA take profits as the shares are likely to correct this upside jump. After a correction the rally may well resume.
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