Carvana Falls 8.55% in Three-Day 11.09% Drop as Bearish Patterns Signal Key Support Breakdown

Carvana (CVNA) has experienced a sharp decline of 8.55% in the most recent session, marking a three-day losing streak with a cumulative drop of 11.09%. The price action reflects heightened bearish momentum, with the stock falling to $329.24 from a recent peak of $396.745. This movement suggests a potential breakdown in key support levels, which will be critical to monitor for further technical validation.

Candlestick Theory

The recent price action forms a bearish engulfing pattern, with the closing price significantly below the opening level on a daily basis. Key support levels are emerging around $327.52 (the low of the most recent session) and $347.80 (a prior consolidation zone). Resistance is likely to be retested at $360.03 and $362.975, which correspond to recent intraday highs. A breakdown below $327.52 could trigger further declines toward the $315.76 level, while a rebound above $360.03 may indicate short-term stabilizing demand.

Moving Average Theory

The 50-day moving average (approximately $350) currently lies above the 200-day MA (around $340), but the recent price drop has brought the 50-day MA closer to the 100-day MA ($345). A potential "death cross" scenario, where the 50-day MA crosses below the 200-day MA, may confirm a bearish trend. The 100-day MA at $345.64 could act as a short-term floor, but sustained trading below this level would strengthen the case for a deeper correction.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the MACD line crossing below the signal line on October 10, 2025, reinforcing bearish momentum. The KDJ oscillator shows oversold conditions (below 30), suggesting potential for a short-term rebound. However, divergence between the KDJ overbought/oversold signals and price action—a common caveat—indicates caution. For instance, while the RSI (discussed below) is near oversold territory, the price remains below key moving averages, suggesting the downtrend may persist despite temporary bounces.

Bollinger Bands

Volatility has expanded, with the bands widening as the stock’s recent drop accelerated. The price is currently near the lower Bollinger Band, indicating extreme oversold conditions. A break below the band could signal increased volatility and potential continuation of the downtrend. Conversely, a retest of the upper band ($378.5) would require a rebound above $362.975 to suggest a reversal.

Volume-Price Relationship

Trading volume has spiked in recent sessions, particularly on the October 10, 2025, close, validating the bearish move. However, the volume on the subsequent down days (October 9 and 8) was slightly lower, which may indicate weakening conviction among sellers. This divergence could foreshadow a short-term bounce, but sustained volume above average levels would be needed to confirm a reversal.

Relative Strength Index (RSI)

The RSI has dipped to 29, entering oversold territory. While this historically suggests a potential rebound, the context of a prolonged downtrend and bearish moving average alignment increases the risk of a false signal. A closing above $360.03 would be required to generate a bullish RSI divergence, but the current price action suggests the oversold reading may not trigger a significant reversal.

Fibonacci Retracement

Key Fibonacci levels between the recent high ($396.745) and low ($327.52) include 38.2% at $367.80, 50% at $362.13, and 61.8% at $356.45. The current price near $329.24 suggests the 61.8% level is acting as a critical support zone. A failure to hold above $356.45 could accelerate the decline toward the $315.76 level (the 78.6% retracement).

Backtest Hypothesis

A backtesting strategy based on selling CVNA when a MACD death cross occurs (e.g., the October 10, 2025, event) would require historical data to evaluate its efficacy. The provided dataset includes one confirmed death cross event, but the absence of post-event price data limits the analysis. While the strategy historically shows mixed results across stocks, CVNA’s recent fundamentals (e.g., Q2 2025 revenue of $4.84B) suggest technical signals may not always align with underlying business performance. A more robust approach would combine MACD signals with Fibonacci retracement levels and volume validation to filter high-probability trade setups.