Stock Of The Day: Is This The Bottom For Carvana?

Carvana Co. (NYSE:CVNA) shares are rebounding Thursday. They dropped by almost 15% yesterday after short seller Gotham City Research released a report alleging inflated earnings and other issues.

• Carvana stock is gaining positive traction. What’s pushing CVNA stock higher?

Carvana is the Stock of the Day. The reversal off levels around $400 wasn't a surprise. These levels were resistance, and in financial markets, resistance can turn into support.

This price action can be seen on the chart of Carvana.

In May 2024, the shares ran into resistance when they reached the $125 level. Two months later, this resistance was broken. When the shares dropped back to $125, it became support.

The same action can be seen at the $160 level. It was resistance in August 2024. After the resistance eventually broke, Carvana fell back to this level in April 2025, and it turned into a support level.

There was resistance around $285 in April 2025. This resistance broke, and the stock went higher in May. It dropped back to $285 in June and November and found support both times.

Resistance levels converting into support levels is a common occurrence in the financial markets. It is due to seller’s remorse.

Some of the people who sell at the resistance regret doing so when it breaks and the price heads higher. Some of these unhappy traders and investors decide to buy their shares back at the same price they sold them for.

When the price drops back to what had been resistance, if there are enough of these unhappy sellers placing buy orders, support will form. What had been resistance will turn into support.

As you can see on the chart, Carvana also encountered resistance around $400 in September. It found support at this level on Jan. 2. It also found support there yesterday and is moving higher today.

Sometimes, when stocks are dropping, traders don't know when to jump in and buy. If they reach former resistance levels, it could be a good time to do it.

Photo: Shutterstock