During the Lightning Round of Mad Money Tuesday night, Jim Cramer liked Carvana (CVNA) , an e-commerce platform for buying used cars. The stock has had a good run, but some recent chart developments are worth pointing out to our Real Money readers.
In this daily bar chart of CVNA, below, we can see that prices of CVNA more than doubled from February to May on a pattern of declining volume. Technical analysts like to see volume expand or increase on rallies.
The daily On-Balance-Volume (OBV) has rolled over the past six weeks. Prices recently reacted sharply and quickly to the downside to test the rising 50-day moving average line.
The Moving Average Convergence Divergence (MACD) has been in a take profits sell mode since the middle of March.
In this weekly bar chart of CVNA, below, we want you to look closely to the three most recent "bars" on the chart.
Last week CVNA made a new high for the move up, and then closed below the low of the prior week. This pattern is called "an outside week with a lower close." This pattern is watched closely by futures traders as it can signal a meaningful reversal to the downside.
Prices are still above the rising 40-week moving average line, but moving averages are late.
The weekly OBV line looks like it could have peaked, and weekly volume bars show a decline the past two months.
The MACD oscillator has begun to narrow and could give a weekly take profit sell signal.
In this point and figure chart of CVNA, below, the software has generated a downside price target in the $48 area.
Bottom line strategy: The fundamentals and the charts of a company do not have to be in sync, and that is the case with CVNA. The charts suggest a decline to the $50-$45 area in the weeks ahead.