Carvana Co (NYSE:CVNA) stock is 2.2% lower at $227.97 at last glance, after sector peer CarMax (KMX) smashed third-quarter earnings estimates. The equity is in the midst of a pullback, pacing for its third-straight loss and shedding 13.5% so far in December. It might be time to buy the dip, however, as history shows the online used car retailer's shares are near a historically bullish trendline.
According to data from Schaeffer's Senior Quantitative Analyst Rocky White, CVNA is within striking distance of its 50-day moving average. For the purpose of this study, White defines that as the equity trading above the moving average 80% of the time over the past two months and closing north of the trendline in eight of the last 10 sessions before coming within striking distance of it.
Per White's data, seven similar pullbacks occurred over the past three years. Carvana stock finished higher one month later after 86% of these signals, averaging a 23.3% gain. A similar move of such massive proportions would add to the security's 328.2% year-to-date lead and put it at its highest level since December 2021.
An unwinding of pessimism could fuel additional gains. Despite such a massive gain in 2024, analysts are still mostly on the sidelines. Of the 19 in coverage, 11 still recommend a tepid "hold" on CVNA.
What's more, short interest on Carvana stock is elevated, with 13.5 million shares sold short, accounting for 10.8% of the stock’s available float, and new optimism from analysts could pressure short sellers to cover their positions.
For those looking to get in on the action, consider options. The security's Schaeffer's Volatility Index (SVI) of 51% sits in the low 9th percentile of its annual range, meaning options traders are pricing in low volatility expectations. The stock tended to outperform these volatility expectations over the past year, per its Schaeffer's Volatility Scorecard (SVS) of 80 out of 100.
