Today, we're going to look at Carvana, a company that sells cars online. This has been one of the hottest stocks of 2020. Can Carvana keep driving higher? Let's go to the charts to find out.
Carvana has been trending higher since March, running from $30 to $218, for an incredible gain of over 700% in just over six months. Carvana's six month rally has been mostly contained within a bull channel, represented by the parallel blue lines. The stock is currently resting comfortably in the center of that channel.
If you look closely on the far right, you'll see a flag pattern, highlighted in purple. This is a bullish consolidation pattern. That means the stock is just taking a rest before continuing its current trend. The bull flag pattern conservatively projects shares of Carvana to the $270 area, which would represent a new all time high.
After a recent pullback, Carvana received a buy signal from its MACD indicator, highlighted in yellow.
The only negative on Carvana's chart is an area of resistance at $230, represented by the red dotted line. If Carvana can get above $230, it should be able to cruise to $270 and beyond.
The bottom line, can a stock that's gained over 700% in six months go even higher? Yes it can. Experienced traders know that you don't want to fight momentum in this market.
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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.