After recently turning negative on Carvana Co. (CVNA) , an online used-car retailer, Jim Cramer checked in during Wednesday's "Mad Money" program with Ernie Garcia, the company's chairman and CEO, for a fresh take on Carvana's outlook.
Garcia said Carvana's results speak for themselves. The company grew its revenue two times over the past two years while the overall auto market remained flat.
When asked how Carvana achieved its success, Garcia said the company is vertically integrated. It mostly sells the cars it buys from customers. Carvana spends around $1,000 per vehicle in refurbishment, he said, then resells the cars at a great price that still makes Carvana money.
Let's check out the charts of CVNA again. We looked at Carvana on June 25 and wrote at that time, "I side with Jim Cramer and recommend taking profits on CVNA."
How do things look now?
In this updated daily bar chart of CVNA, below, we can see that prices have tested the $315 area a number of times. This is the prior high made in early March, and so far prices have not been able to successfully break through to new high ground. CVNA is trading above the rising 50-day and the rising 200-day moving averages. Trading volume increased in late June but did not reach "escape turnover." The On-Balance-Volume (OBV) line has risen from the middle of May but does not look like it has broken to a new high. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but it has narrowed significantly toward a possible downside crossover and sell signal.
In this weekly Japanese candlestick chart of CVNA, below, we can see a mixed picture. Prices are trading above the rising 40-week moving average line. The candles show some upper shadows around $320, telling us that traders have been rejecting the highs. The weekly OBV line has been leading the price action as it recently made a new high. The trend-following MACD oscillator just crossed to the upside for an outright buy signal.
In this daily Point and Figure chart of CVNA, below, we can see that the software from www.stockcharts.com is projecting an upside price target in the $373 area. A trade at $324.72 is needed for an upside breakout.
Bottom line strategy: Some of the indicators for CVNA are bullish, but they are not strong enough to recommend going long. I would continue staying on the sidelines with CVNA. Weakness in the broad market averages could easily spill over to CVNA.