Takeaways
- Carvana’s shares rose by nearly 4% Tuesday, extending the winning streak to five consecutive.
- Morgan Stanley analysts have upgraded the stock and said that recent selling of the shares offers investors an opportunity to gain exposure to this online automotive retailer.
- Since reaching their late November peak, Carvana stock has oscillated within an existing trading range. This could indicate that the stock is consolidating before its next upward move.
- Investors should watch crucial overhead areas on Carvana's chart around $265 and $365, while also monitoring key support levels near $165 and $130.
Carvana shares (CVNA) surged on Tuesday after Morgan Stanley upgraded the stock, extending its winning streak to five consecutive days.
Analysts at the investment firm said that recent sales of the shares provide an opportunity for investors gain exposure to a leading leader in auto retailing and fleet fulfillment. They added that the company could become the Amazon (AMZN), of auto retail.
Carvana’s shares, which gained nearly 4% Tuesday to close near $222, have gained 33 % during their five-day rally. The stock is still down 24% from its record high set last month, but it remains 150% higher than its year-ago level, boosted by the company's improved profitability and efforts to reduce costs.
Below, we breakdown the technicals in Carvana’s chart and identify important price levels that are worth monitoring.
Trading Range Signals Potential Consolidation
Since reaching their late November peak, Carvana stock has oscillated within an existing trading range. This could indicate that the stock is consolidating before its next upward move.
In recent weeks, buyers appeared just below the 200-day average, and the price closed back above this closely watched indicator last Friday. Recent buying coincided with RSI reclaiming 50 threshold, another win for bulls.
Use technical analysis to locate key support levels and overhead areas that investors may be watching on Carvana’s chart.
Important Overhead Areas To Watch
Around $265 is where you should be paying attention. This region could be a selling pressure area near the prominent November swing-high of last year, and a short period of consolidation before the stock’s record-high.
Investors can forecast a target price if Carvana shares reach blue sky territory by using the measuring principal, a technique which analyzes chart patterns in order to predict future prices movements.
When applying the analysis to Carvana’s chart, we add the distance in points of the trading range to the upper trendline. We can add $100 to the $265 price, which will give us a target of $365. That’s 65% more than Tuesday’s close.
Key Support Levels Worth Monitoring
Investors should pay attention to the $165 mark during pullbacks. This area of the chart could provide support near recent bottoms and a small retracement on the chart that formed in late September last. A breakdown below this level increases the possibility of a stock double top.
Carvana shares could reach $130 by selling below the lower trendline in the trading range. Investors should look for opportunities near the trendline that connects a series of peaks on the chart between last May and September.
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