It's a rare occasion when fundamentals and technicals align, and we might just have a compelling case here. Carvana stands out as one of the most heavily shorted stocks in the market. The company has been in the red for quite some time, and this quarter was no exception, with a loss of $1 per share, falling short of analysts' expectations on both EPS and revenue (they lost more than expected).
Despite these challenges, the company sees a shift in demand, with buyers increasingly returning to online car purchases. The Orange number 1 on chart marks the lowest price at the open on the gap-up day ( $66.48), a +26% jump from the previous night's close. The momentum didn't stop there; the price ran another 20% to hit a daily high of $76, before settling at $69.21.
Here's my strategy: - Stop: Sell if the price drops below $66.48 (allow some leeway, given the volatility) - Target: If it trades above $76, we could be looking at an elevator ride up to $150, mirroring its previous ride down from $150 to under $30 a share.
I'm eyeing a 1:2 quick trade risk/reward ratio, but that's a waste and the prospect of a potential short squeeze is tantalizing (yes, I said it!). Opportunities like this are few and far between.
Trade carefully, OnlyTrade2Win.
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It's working really nicely, lets see if the short squeeze will really come. Take a look at the Weekly chart
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added 20% to initial position yesterday morning (March 7, 2024)- I put a bid in @ $76.89 before market opened and got hit
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The market is selling off from the open. Sold the 20% I added on March at $85.52, holding core position.
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bought back the 20% I sold above at $79.53. This is probably not the best entry, yet i know if this thing ticks up, the shorts will get nervous.
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FOMO- i knew i was jumping the gun with buying back 20% at 79.53. yet the idea of missing out on this one, was a lot more painful than the 3 points i "missed":)
Comentário
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The stock is at the top of the range at the same place it had a deep pullback. Be careful- I\if you chase it, be ready for a deep pullback.
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if the broad market continues to pullback/selloff, the stop on CVNA is bellow the February 23 Low 66.45 and my average entry price is 74.46 , if stopped out it will be a 3.2% loss for the account. Mistakes so far: -1 the 79.53 was definitely jumping the gun for the +20% -2 what was worse, I did not sell the 20% at 90 as planned. that was the last time i will cancel my offer because of no particular reason, or especially when the "big Idea" start working and i get greedy (they say that if you write your commitments down, there is a 90% greater chance to reach them). what are your latest mistakes ?
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Finally sold the 20% from March 11th. The trade is working really nicely because the guidance the company provided last year is actually coming to fruition and we still have a HUGE short interest in this stock. Let's see if can make it to $150...
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CVNA held the lows for the gap up day after its earnings on Feb 24nd. The same concept applies to the gap up after May 1st earnings. If buyers are more aggressive than sellers, they should defend the $111 area ( the low of the gap up day). I'll take profit on half my position if it trades below the low of the gap up day, with some room added for high volatility in this stock. CVNA still has over 30% short interest. It was over 40% when we entered the trade. So there are a lot more potential buyers that can enter the market at any time. The same thing goes for the sellers:)
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I took profit on 95% of my position at $110 and am keeping the small amount just to keep track of this one. I noticed that publicly posting my ideas makes me not touch my orders and i am seeing a huge profitability improvement. If you haven't tried posting your ideas publicly, you should. It is an additional level of accountability. And even though my greedy part says "common man, there is more!", I took my profit where i said i would and i'd rather get back in at a good spot vs. let this hugely profitable and publicly documented trade run away:D
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Do not catch a falling knife. There is a big battle of big money going on in CVNA. So far everything the management of the company told us came true- there is a rebound in used car sales. CVNA is looking to test that $95-93 area where it closed before the last earnings. Lets see if the bears will be able to push it down or they will get trapped. Again:) to recap- i took profit on 95% of my position and am keeping small amount to see if it gets to the $150 area. But the fun part is already behind, unless we hold the $93 area and build some kind of base into the next earnings and the company comes through on sales volumes. Be careful with this one, there are big bets by big players in both directions and it may get supper volatile.