Alright regards, let me preface this by saying NO ONE SHOULD DO THIS. This is a dumb idea, and I will likely lose. I bought puts on CVNA at close on Friday. If you want to see my past plays, check my profile. I called the MRNA bounce, the NVDA sell off, the NKE bounce, but the UPST one was a bit off(still think it’ll happen).
Why would i do something so dumb? Because I like spotting trend reversals as they’re happening. On the daily chart, you can clearly see the trend line break today. The MACD is turning over, the RSI is dropping even though we’re still near the short term top, and that is a very convincing red candle on the daily.
On the 30 minute, you can see the aggressive break more clearly, but more importantly to me is the fact that the 50 day and 100 day EMA’s have crossed to the downside for the first time since August 30. That is fucking crazy that it took that long for that to happen. IMO that is a very bearish signal that I am not going to ignore.
I’m not going to go into CVNA’s financials or practices or the fact that they inflate their GPPU. There are SO many DD’s about how it’s overvalued and a scam company. Everyone knows that, but it just continues its stupid melt up. That is, until next week. I’m hoping other traders see this and decide to start selling/shorting this bitch into oblivion. They probably won’t tho and my contracts will expire worthless, but we’ll see.
One thing to note; CVNA’s delinquencies are at 12.6% and rising. Their partner, Ally financial, warn in September that their delinquencies on auto loans was 20 bps higher than expected. That’s significant. Ally’s stock took a hit for that but CVNA didn’t because CVNA is not on the hook for the trash loans they sell to Ally. However, Ally can increase their underwriting standards and make it harder for CVNA to give loans to every regard with a pulse. Honestly this smells a lot like mortgages in 2008. Eventually this will blow up, it’s just a matter of when. And I’m not saying it’ll blow up this week. I just like the technical setup.
In closing, this is stupid and no one should do this. But I like a challenge, and I like being right. I only have 3 $240 puts so far, I may get more Monday. It’s not a big bet at all, but i want some skin in the game so I can say I’m right if it plays out how I think it will. Not financial advice, and do not tail me unless you’re ok with losing what you put in.