Carvana Levels to Watch as Stock Jumps 20% on Strong Earnings, Outlook Boost

Key Takeaways

• Carvana shares soared in extended trading on Wednesday after the online car dealer blew past Wall Street’s third-quarter earnings estimates and raised its full-year outlook.
• The stock has recently reclaimed the 200-week moving average and sits poised to break out above the upper trendline of a rising wedge pattern following the company’s better-than-expected quarterly results.
• Investors should monitor key overhead price levels on Carvana’s chart around $240, $300, and $365.
• During retracements, investors should closely monitor the $165 level, a location where the shares would likely attract buying interest near the September 2020 pullback low and January 2022 countertrend high.

Carvana (CVNA) shares soared in extended trading on Wednesday after the online car dealer blew past Wall Street’s third quarter estimates and raised its full-year outlook, boosted by strong vehicle sales.

The company said it expects 2024 earnings to come in significantly above its prior forecast of $1 billion to $1.2 billion, supercharged by an increase in retail vehicle sales between the third and fourth quarters.

Carvana shares rose 20% to $248.99 in after-hours trading. Through the close of regular trading hours Wednesday, the stock had risen nearly four-fold since the start of the year.

Below, we take a closer look at the technicals on Carvana’s weekly chart and locate several key post-earnings price levels likely to attract attention.

Rising Wedge Breakout

Since bottoming out in December 2022, Carvana shares have traded within a rising wedge, a chart pattern featuring two upward sloping converging trendlines.

More recently, the stock has reclaimed the 200-week moving average and threatened to break out above the pattern’s upper trendline. That move looks set to occur on Thursday, with the price poised for a decisive breakout after the company’s better-than-expected quarterly results.

Let’s identify three key post-earnings overhead levels on Carvana’s chart and also point out a crucial support area to monitor during retracements.

Key Overhead Levels to Watch

The first important overhead level to eye sits around $240, an area where the shares may run into selling pressure near multiple peaks and troughs on the chart between August 2020 and May 2021.

A convincing close above this key technical level could see the shares climb to the $300 area. This region may encounter resistance around the psychological round number and a trendline that joins a range of comparable trading levels from January to November 2021.

Further buying may fuel a rally up to around $365, a location where investors could look to offload shares just below the prominent August 2021 peak and stock’s all-time high (ATH).

Crucial Support Area to Monitor

Given the relative strength index (RSI) sits poised to flash its highest reading since 2018 after the post-earnings jump, the stock remains prone to profit-taking.

During retracements, investors should closely monitor the $165 level, a location on the chart where the shares would likely attract buying interest near the September 2020 pullback low and January 2022 countertrend high.

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As of the date this article was written, the author does not own any of the above securities.