Carvana (CVNA) is set to report earnings with options implying a large move. While short interest is low and institutional long interest is diversified, technical indicators suggest weakening price momentum. Historical earnings volatility and declining volume ahead of results may point to short-term downside pressure.

Carvana (CVNA), the online platform for buying used cars, is due to report earnings today after the bell. The options market is implying a 13% one-day move after earnings, vs the average one-day move of 22% over the past 8 periods.

S3 Short interest is currently sitting near all-time lows, at 7 million shares and 6% of float, respectively. This would typically indicate bullish sentiment. DTC has also steadily declined as liquidity has increased.

S3 Long Interest, estimated to be 134 million shares, is currently split between:

Active - 48 mill shares / 36% LI % Out / 376 funds Passive – 86 mill shares / 64% LI % Out / 446 funds

Utilizing S3 Black MAP, we can see CVNA has become less concentrated and more diversified among both Active and Passive holders, as the # of funds owning the stock have increased. Here is a snapshot of ‘Hedge Fund Managers’ long CVNA.

From a technical perspective however, the short-term price action may disappoint post-earnings.

Falling trading volume as stock price rises is a potential red flag.

This tends to suggest weakening momentum and a lack of conviction, as less buyers step to support the price.

You can see this same set up happened earlier this year leading up to the previous high, with the stock price rising on falling volume.

Anticipate a pullback to the moving averages in the short term, with potentially another exhaustion gap to the downside.

While long interest is strong and the short base has thinned, the setup heading into earnings shows risk skewed to the downside. Diminished trading volume on price strength and historical volatility raise caution. Investors should watch for signs of a reversal and brace for a potential technical pullback.

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