Carvana- Low Risk/High Reward Entry

26 Feb

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.

2 Mac

Dagangan aktif

It's working really nicely, lets see if the short squeeze will really come.
Take a look at the Weekly chart

8 Mac

Dagangan aktif

added 20% to initial position yesterday morning (March 7, 2024)- I put a bid in @ $76.89 before market opened and got hit

8 Mac

Dagangan aktif

The market is selling off from the open.
Sold the 20% I added on March at $85.52, holding core position.

11 Mac

Dagangan aktif

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.

13 Mac

Dagangan aktif

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":)

26 Mac

Nota

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.

16 Apr

Dagangan aktif

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 ?

2 Mei

Dagangan aktif

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...

6 Mei

Dagangan aktif

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:)

24 Mei

Dagangan aktif

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

2 Jun

Dagangan aktif

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.

27 Jun

Nota

The price briefly breached par on June 3,4 and came close to it on June 17th, then strongly rejected that area and we made a new higher high. It's getting closer to the $150 target I was eying in February. Let's see, maybe we get one more buyable deep pullback...

1 Ogo

Dagangan ditutup: sasaran tercapai

"Opportunities like this are few and far between." This is how the trade started on February 26, 2024.
On August 1st, 2024 we found out that the management's prediction from two quarters ago about seeing a huge return of customers to used cars turned out to be true. CVNA reported its earnings today, and they finally made money this quarter.
And the most beautiful part is that this trade had a 1 to 10 risk-reward ratio and ended up 100% in just 5 months.
Thank you!

20 Ogo

Dagangan aktif

Oh this sell off was such a great gift! First, CVNA showed that buyers are much more aggressive than the sellers. Second, we had a great pull back to buy in the $130 area. Now we just wait and see how much steam it has left...

30 Okt

Nota

The higher we go, the more buyers CVNA finds. No pullbacks, no big down days.
Can we make it to $230? Lets wait and see.

31 Okt

Nota

wow $250
took profit on 60%
do we test all time highs next? lets wait and see

1 Nov

Nota

Closed out another 20% of my position at $232, bringing the total realized profit to 80% of the position

5 Dis

Nota

CVNA still looks good up here at 260

20 Dis

Nota

Carvana (CVNA) Update: Watching the Pullback and Market Strength/ Weakness

"They always look good at the top, until they don't"—that’s why entry price is everything. When you’ve got over 100 points on a trade you’ve been in for almost a year, you start to understand how the price “normally” acts and reacts. So, is a 15% pullback in 2 days a “normal” move for this stock, or is it telling you something bigger? You’re now watching closely for signs of what’s next.
On the flip side, when you get in at a bad price, you find yourself constantly looking for confirmations to justify staying in. That’s when the trade becomes all about waiting—mostly waiting for your stop to get hit, so the stock can reverse and finally go the way you thought it would from the start. You know what I'm talking about. Right?

From December 5th to December 19th, the Dow Jones closed in the red every single day. Despite this, CVNA held up well until December 18th, when it sold off 14% over the next 2 days. This tells us that while the broader market was under pressure, sellers in CVNA didn’t get aggressive until the broader market saw its two big down days.
Now, we’re looking at two potential scenarios:
The Pullback Play (worked well all year): Buy the pullback for a continuation higher.
The Exhaustion Trade (when last year’s strategy stops working): The trade may be finished.

Levels to Watch
Support near $219.71 (Nov 4th lows): A stop below this level makes sense for those entering here, but be aware: stops in this area could trigger a spike down, which might offer a reversal opportunity.
Break below $219: If this level is broken, it’s likely we’ll test lower levels.

Final Thoughts
If the broad market shows some strength, this could be a good spot to step in with a decent risk-reward setup—but only if you’ve got your stops in place. This is where you decide: are you ready to test the waters, or are you staying patient to see how it plays out?