Options Corner: CVNA Key Levels & Example Trade

0:00Since time for options corner joining us now to take a deeper look at this name is Rick DeCat lead market technician very good morning to you Rick hope you had a nice weekend just walk us through the trend you're seeing on the chart here for Carvana. Yes good morning and when we see here Carvana still performing pretty handily the broader index as well as the consumer discretionary ETF XL Y up about 87 percent despite the notable declines that that you mentioned here. So when we do look kind of more at these this sector here these auto dealerships Carvana still at the top of the pack here but you know not really too terribly much competition in terms of tradable companies here auto nation is the next best one in purple here up 25 percent. When we do look at our chart here our candle chart for Carvana looking at the past here a downward sloping channel type shape has been the prevalent theme here since our last earnings event you can see that's where things began but recently we seem to have started to break to the upside here for now though we have halted near the 320 level our red line here we haven't really

1:02been able to make a firm push above that boundary for now if we were then another area to watch out for would be that relative high near 354 to the downside if we were to backtrack to 90 stands out we can see that was a notable low point here as well as here as well as a range that we've established recently beyond that 267 a similar notable low point from back earlier in the year when we do look at our moving averages that we study here price is starting to push above the confluence of our weekly and monthly exponential moving averages in blue and teal here respectively those come together roughly around three ten or so so that could be a short term boundary to keep an eye on here meanwhile the next stop could be our long term orange 251 day yearly exponential moving average near about 333 rsi on the verge of crossing above our 50 midline here that could be another bullish signal as well look for momentum to follow suit along with price finally volume profile

2:03this study shows the heavy trading activity areas our point of control our thick red line comes in near 343 41 or so that would be a potential congestion point for the the bulls to watch out for another line here 253 okay that's the big picture in the chance for Carvana how would you then set up an example trade for this name Rick right looking at our expected move here for the may monthly expiration 39 days out that's our yellow line that we have here so gives us a potential range of a little shy of plus or minus 26 percent bearish news today as well so minus one may 15th 360 370 call vertical at a 275 credit here so neutral to bearish type of trade here max profit 275 max loss 725 here so a little bit you know better for the trader in terms of the risk reward than one to three pretty close to that kind of common example many traders use here break even 362 75 as I said 17.8 percent to the upside expected move 25.9 percent or so so within that

3:11range here but kind of banking on us uh feeling to take out those recent relative highs for this uh example trade all right good stuff a good look at Carvana there we will be watching uh when we see it open for trade this morning thanks so much for running us through the charts and the example trade today Rick