CVNA Breaking Out of DowntrendCVNA has broken out of a downtrend that started in mid September. It is also testing the resistance line of a rounding bottom that started forming in early December. I went long near the closing price of the breakout day based on break of downtrend. This trade would be considered premature in terms of the rounding bottom thesis but I may add to my position if it goes my way and the rounding bottom is proven. The RSI is right around 54 at the moment indicating that there is room to run much higher.
Stop loss is set just below the low of the last day inside the downtrend: $34.70 or 6% risk.
Ideal target is the approximate height of the round bottom which is $8.50: $45.40 or 23%.
Risk/ reward is: 3.84
WHY THIS TRADE MIGHT FAIL:
Target was established based on assumed completion of another pattern.
Volume on breakout day was less than ideal.
Rounding bottom volume approximately but far from perfectly matches the shape of the bottom itself.
The $40 is a key level which could impede reaching the full target.
Good luck have fun.
