Hi guys! This is a quick analysis on my opinions on a current chart pattern that may be playing out in Carvana (CVNA).
At first glance you can notice the formation of a Bull Flag on the 1 Week CVNA chart.
As you can see we have had our Sharp price move to the Upside, almost resembling a straight line up. This is known as the Flagpole. The Volume spike seen in this move is supportive of this phase.
Followed by a pause or sideways action resembling a parallelogram. Here we see diminishing Volume, which is supportive of this phase as well.
This pause is to consolidate/ take a break from such a massive uptick in price during formation of the flagpole.
Flag patterns are known to be one of the most reliable continuation patterns and are said to rarely lead to Reversal of Trend.
Currently we are in the process, on our current Daily Candle of trying to breakout.
But we are meeting with Serious Resistance, depicted by a MASSIVE Upper Wick. Ideally, i'd like to see a larger body at the close of today's candle.
Could this still lead to a break out? Well one thing to check is the VOLUME.
For a breakout to occur we need to see a Massive Spike in VOLUME.
Which we have not seen yet.
Could be warning for a test back down to the lower rim of the parallelogram. This would also lengthen the time spent in forming this pattern.
Also note that Flag patterns are normally short term patterns and shuold breakout within 1 to 3 weeks, as per theory.
We are currently 8 bars in on the weekly chart indicating 8 weeks of consolidation.
This is Not Textbook. Which has me second guessing if this is a Bull Flag.
We have so much Resistance Above us, and the massive sharp move from $3, didnt create strong market structure. This in my opinion could lead to a collapse of current move with a massive correction.
Continue to monitor this. Remember to trade a Bull Flag:
You must wait for a breakout with CONFIRMATION before you take positions.
I would personally not take a trade inside the pattern. Watch for signs of rejection here as well.
__________________________________________________________________________________
Thank you for taking the time to read my analysis. Hope it helped keep you informed. Please do support my ideas by boosting, following me and commenting. Thanks again.
Stay tuned for more updates on CVNA in the near future.
If you have any questions, do reach out. Thank you again.
DISCLAIMER: This is not financial advice, i am not a financial advisor. The thoughts expressed in the posts are my opinion and for educational purposes. Do not use my ideas for the basis of your trading strategy, make sure to work out your own strategy and when trading always spend majority of your time on risk management strategy.
At first glance you can notice the formation of a Bull Flag on the 1 Week CVNA chart.
As you can see we have had our Sharp price move to the Upside, almost resembling a straight line up. This is known as the Flagpole. The Volume spike seen in this move is supportive of this phase.
Followed by a pause or sideways action resembling a parallelogram. Here we see diminishing Volume, which is supportive of this phase as well.
This pause is to consolidate/ take a break from such a massive uptick in price during formation of the flagpole.
Flag patterns are known to be one of the most reliable continuation patterns and are said to rarely lead to Reversal of Trend.
Currently we are in the process, on our current Daily Candle of trying to breakout.
But we are meeting with Serious Resistance, depicted by a MASSIVE Upper Wick. Ideally, i'd like to see a larger body at the close of today's candle.
Could this still lead to a break out? Well one thing to check is the VOLUME.
For a breakout to occur we need to see a Massive Spike in VOLUME.
Which we have not seen yet.
Could be warning for a test back down to the lower rim of the parallelogram. This would also lengthen the time spent in forming this pattern.
Also note that Flag patterns are normally short term patterns and shuold breakout within 1 to 3 weeks, as per theory.
We are currently 8 bars in on the weekly chart indicating 8 weeks of consolidation.
This is Not Textbook. Which has me second guessing if this is a Bull Flag.
We have so much Resistance Above us, and the massive sharp move from $3, didnt create strong market structure. This in my opinion could lead to a collapse of current move with a massive correction.
Continue to monitor this. Remember to trade a Bull Flag:
You must wait for a breakout with CONFIRMATION before you take positions.
I would personally not take a trade inside the pattern. Watch for signs of rejection here as well.
__________________________________________________________________________________
Thank you for taking the time to read my analysis. Hope it helped keep you informed. Please do support my ideas by boosting, following me and commenting. Thanks again.
Stay tuned for more updates on CVNA in the near future.
If you have any questions, do reach out. Thank you again.
DISCLAIMER: This is not financial advice, i am not a financial advisor. The thoughts expressed in the posts are my opinion and for educational purposes. Do not use my ideas for the basis of your trading strategy, make sure to work out your own strategy and when trading always spend majority of your time on risk management strategy.
Comment:
This area is also a Potential SELL ZONE to take Profits.
Comment:
We have moved back inside the Flag pattern. Clear rejection from the Resistance zone.
Breakout Above was a Fakeout for now.
I would not take Shorts here, if you havent already taken positions at or around the Rejection area.
Keep observing, but we are in a clear downtrend. We are Below the 21 EMA. Need to watch where it stops.
For now look for the 50 SMA Support test.
We can have a short bounce from here to re-test the Upper border of flag. If not and
If we break this.
There is risk of moving to test the lower border of the Flag pattern.
If we reach here, or bottom of the Rectangle Sideways pattern and show confirmation of SUPPORT. I would take positions for a bounce.
We have moved back inside the Flag pattern. Clear rejection from the Resistance zone.
Breakout Above was a Fakeout for now.
I would not take Shorts here, if you havent already taken positions at or around the Rejection area.
Keep observing, but we are in a clear downtrend. We are Below the 21 EMA. Need to watch where it stops.
For now look for the 50 SMA Support test.
We can have a short bounce from here to re-test the Upper border of flag. If not and
If we break this.
There is risk of moving to test the lower border of the Flag pattern.
If we reach here, or bottom of the Rectangle Sideways pattern and show confirmation of SUPPORT. I would take positions for a bounce.
We are attempting a breakout with an engulfing Bull Candle.
Just note: This DOES NOT Signify CONFIRMATION.
Wait for Confirmation of breakout to take positions.
We are also hitting up against MAJOR RESISTANCE ZONE. Watch how we react here.