Relative Strength Despite the Pullback
Despite notable declines in the broader market, Carvana (CVNA) continues to outperform both the S&P 500 and the Consumer Discretionary ETF (XLY) by a remarkable margin — up approximately 87% over the trailing period. Among online and traditional auto dealership stocks, Carvana sits firmly at the top of the pack, with the next closest competitor, AutoNation, trailing significantly at around 25% gains. That relative strength is worth noting, but it doesn't mean the stock is without risk at current levels.
The Downward Channel and a Potential Breakout
Looking at the daily candlestick chart over the past year, the dominant pattern for Carvana has been a downward-sloping channel that began forming after the most recent earnings event. Price action had been contained within this channel for months, but recently, the stock has started to break to the upside.
However, the breakout attempt has stalled near the $320 level, which is acting as firm resistance. The stock has not yet managed a convincing push above this boundary. If it does, the next area to watch would be the relative high near $354, a level that could attract selling pressure.
On the downside, the key support levels are clearly defined:
- $290 — a notable low point that has been tested multiple times and aligns with a recently established trading range.
- $267 — a deeper support level marked by a significant low from earlier in the year.
Moving Averages Tell an Encouraging Story
Price is beginning to push above the confluence of the weekly and monthly exponential moving averages (EMAs), which converge near the $310 area. This clustering of moving averages creates a natural short-term support zone — if the stock can hold above it, the bias tilts bullish.
Beyond that, the next significant moving average to watch is the 251-day (yearly) exponential moving average near $333. This longer-term average would represent a meaningful hurdle for the bulls and could serve as a magnet for price if momentum builds.
RSI and Momentum Signals
The Relative Strength Index (RSI) is on the verge of crossing above the 50 midline, which would be a classically bullish signal. A sustained move above 50 on the RSI would suggest that momentum is shifting in favor of buyers. However, it's important to look for price confirmation alongside any momentum crossover — signals are strongest when both align.
Volume Profile: Where the Action Has Been
Volume profile analysis reveals the point of control near $340–$341, representing the price level with the heaviest trading activity over the lookback period. This is significant because it acts as a congestion zone — a level where a large number of shares have changed hands and where price may struggle to push through cleanly. Bulls would need to clear this area decisively to open the door to higher prices. Another notable volume node sits near $253, which reinforces the deeper support structure.
An Example Bearish Trade: The Call Vertical Spread
Given the current setup — resistance overhead, bearish news flow, and the stock stalling below key levels — a neutral-to-bearish options strategy makes sense as a defined-risk approach.
The trade in question is a short call vertical spread (also known as a bear call spread) on the May 15th expiration, 39 days out:
- Sell the $360 call / Buy the $370 call
- Credit received: $2.75 per share ($275 per contract)
- Maximum profit: $275 (if CVNA stays below $360 at expiration)
- Maximum loss: $725 (if CVNA closes above $370 at expiration)
- Breakeven: $362.75
The risk-reward ratio comes in just under 1:3, which is a common threshold many options traders use as a baseline. The breakeven point of $362.75 sits approximately 17.8% above the current price, while the expected move for the May expiration is around 25.9%. This means the trade is positioned within the expected range but essentially bets that Carvana will fail to take out its recent relative highs over the next five-plus weeks.
Putting It All Together
Carvana remains a strong relative performer in the consumer discretionary space, but the technical picture is at an inflection point. The stock has broken out of its downward channel — a positive development — yet it faces meaningful resistance at $320, with the volume point of control near $340 presenting another hurdle above that. Support is well-defined at $290 and $267.
For traders with a neutral-to-bearish outlook, a short call vertical spread above the resistance zone offers a way to express that view with defined risk, collecting premium while the stock remains below key overhead levels. For bulls, the critical task is clearing $320 with conviction and holding above the $310 moving average confluence — a failure to do so could send the stock back toward the lower end of its range.