Carvana's Sudden 3.65% Slide: Earnings Success or Market Correction?

Summary
• Carvana's Q2 earnings beat expectations with $4.84B revenue, 41.9% YoY growth, and $1.28 EPS
• Analysts raised price targets to $375-$415, while institutional investors increased stakes by 15-37.9%
• Intraday price plunged to $352.475 from $371.38 high, trading at 84.7% of 52W high
The automotive retail sector faces a pivotal moment as Carvana's stock tumbles sharply despite strong fundamentals. With institutional buying, analyst upgrades, and record sales, the divergence between fundamentals and price action raises urgent questions about market sentiment and technical triggers.

Profit-Taking After Record Earnings Spree
Carvana's 3.65% intraday decline follows a 10.7% weekly surge driven by record Q2 results. The $4.84B revenue (41.9% YoY) and $1.28 EPS (beating by $0.19) triggered analyst upgrades and institutional buying. However, the sharp correction suggests profit-taking after the stock surged 17.7% post-earnings. Short-term momentum indicators (MACD 7.84, RSI 57.9) show waning bullish pressure, while Bollinger Bands (Upper: $374.21) indicate oversold conditions at the $352.48 level.

Automotive Retail Sector Mixed Amid Tariff Uncertainty
The automotive retail sector remains volatile as U.S.-China tariff debates persist. CarMax (KMX, +0.107%) and AutoNation (AN, -6.8%) show divergent trends. Carvana's 3.65% drop contrasts with KMX's resilience, suggesting sector-specific factors. While Carvana's margin expansion (3.46% net margin) outperforms peers, its 3.57 beta exposes it to broader market jitters.

Leveraged ETFs and Short-Dated Options for Volatility Play
• 200-day MA: $254.80 (well below current price)
• 50-day MA: $333.58 (resistance level)
• RSI: 57.9 (neutral territory)
• MACD: 7.84 (bullish but weakening)
• Bollinger Bands: $319.19-$374.21 (current price near lower band)
The technical setup suggests a short-term bearish bias with potential for a bounce off $346.7 (200-day MA). YieldMax CVNA Option Income Strategy ETF (CVNY) and Defiance Daily Target 2X Long CVNA ETF (CVNX) offer leveraged exposure, though CVNX's -8.04% drop highlights volatility risks.
Top Options:
• CVNA20250808C370
- Call, $370 strike, 8/8 expiry
- IV: 46.82%, Leverage: 118.83%, Delta: 0.2609 (moderate), Theta: -1.3964 (high decay), Gamma: 0.0166 (responsive)
- Turnover: $325,954 (liquid)
- Payoff at 5% downside: $0.00 (out of the money)
- Ideal for aggressive bulls anticipating a rebound above $370
• CVNA20250808C375
- Call, $375 strike, 8/8 expiry
- IV: 45.80%, Leverage: 192.70%, Delta: 0.1823 (conservative), Theta: -1.0397 (moderate decay), Gamma: 0.0138 (responsive)
- Turnover: $186,811 (liquid)
- Payoff at 5% downside: $0.00 (out of the money)
- Suitable for high-volatility bets with defined risk
Position sizing should prioritize CVNA20250808C370 for its balance of leverage and liquidity. Aggressive bulls may consider scaling into CVNA20250808C375 if the stock stabilizes above $360.

Backtest Carvana Stock Performance
The backtest of CVNA's performance after a -4% intraday plunge shows favorable short-to-medium-term gains. The 3-Day win rate is 52.52%, the 10-Day win rate is 53.52%, and the 30-Day win rate is 61.41%. Additionally, the maximum return during the backtest period was 19.75% over 30 days, indicating potential for recovery following a significant pullback.

Act Now: Watch $346.7 Support and KMX's Lead
Carvana's sharp correction creates a pivotal inflection point. With earnings momentum intact but technical indicators weakening, investors must watch the $346.7 (200-day MA) support level. The sector leader Carmax (KMX, +0.107%) offers a benchmark for retail sector resilience. Positioning in short-dated calls (e.g., CVNA20250808C370) could capitalize on a potential bounce, while put spreads hedge against further downside. Immediate action is warranted as volatility remains elevated.