Over 31% of Shares, Sold-Short

Carvana, is a train-wreck.

It’s a train-wreck that’s already happened.

Fundamentals are horrendous:

Book Value of -$6.56/share; no P/E since at least 2018, if-ever (data, Worden Brothers).

Using that Book Value, if the company was liquidated (theoretically) at this juncture, with 189-million shares outstanding, over $1.24-Billion, would be left unpaid.

Naturally, shorts have moved in and moved in aggressively.

They have collectively sold over 31%, or 33-million (there’s that ’33’, again) of outstanding shares, short (courtesy of BigCharts).

With all the financial carnage, you’d think it’s a no-brainer to be short. However, looking at the chart, there could be trouble ahead for those shorts.

Carvana CVNA, Weekly

It’s likely that with each pull-back from resistance (blue line) the shorts increase and so do the stops.

We have to figure, with over 33-million shares short, that’s huge buying potential.

Barring a bankruptcy (also a possibility) and CVNA, going to zero, shorts have to cover at some point, to close positions.

Earnings & The Fed

The Fed meets on October 31st and November 1st.

Carvana has its earnings scheduled for November 2nd.

Positioning

It may already be over for CVNA, and price action continues lower in the coming days and weeks (not advice, not a recommendation).

However, if we get signs of a rally, that rally may turn into an all-out squeeze leading up to the Fed and earnings.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279