Anatomy Of A Trade: CAVA +40% Breakout

Oliver Kell
Oliver Kell

Oliver Kell is a champion trader who achieved an impressive 941% return by winning the 2020 U.S. Investing Championship. With years of active trading experience, Oliver has developed strategies that thrive in both uptrends and downtrends.

September 11, 2024
8 min read
432 views

After CAVA bottomed below its IPO low, a gap-up on its IPO expiration day led to a 110% advance, putting the stock on Oliver Kell’s radar in December of 2023.

Following a Wedge Drop in early April 2024, Oliver closely monitored the stock’s first pullback. A Bullish Engulfing candle emerged on the daily timeframe confirming support on the weekly chart.

A gap-up Wedge Pop reclaiming the moving averages provided an ideal entry when a new uptrend began.

This chart review will unveil Oliver’s thought process and trade execution in and out of a 40% trade.

CAVA 40 Breakout 1
Chart via Deepvue

The Pullback: Weekly Timeframe Supports Daily Reversal

Date: April 25, 2024

Daily: A Wedge Drop confirmed a new downtrend at the beginning of the month, but Oliver kept a close eye as he began marking levels on the chart and waited for an opportunity.

After a potential reversal, we wait for a sign of strength for confirmation that the price is reclaiming the moving averages to the upside.

CAVA formed a Bullish Engulfing as a follow-up signal that the stock might begin a new uptrend.

CAVA 40 Breakout 2
Chart via Deepvue

Weekly: CAVA broke above its previous all-time high earlier in the year and was becoming one of the strongest stocks in the current market uptrend. The current week shook out a new low but quickly found support at previous highs and began to reverse.

CAVA 40 Breakout 3
Chart via Deepvue

Buy The Confirmation Of A New Uptrend

Date: April 26, 2024

CAVA blasted through the buy area on a gap up with increasing volume and Oliver initiated his position with a stop set under the day’s low.

Continuing to manage a trading plan we begin looking at previous highs as an area of potential resistance. If the price can put in some sort of handle or flag pattern there may be a potential to add more.

CAVA 40 Breakout 4
Chart via Deepvue

Sell Into Strength

Date: April 30, 2024

When the general market experiences weakness, it becomes essential to sell stocks into strength. The QQQ was finding resistance at the declining moving averages while CAVA became short-term extended into previous highs.

Oliver elected to lock in his gains.

CAVA’s price action continued to show relative strength but the euphoric move may have gotten ahead of itself. If the market continues lower, CAVA will be a top focus to watch for a new pattern to develop.

CAVA 40 Breakout 5
Chart via Deepvue

Re-Entry At Support

Date: May 2, 2024

Oliver re-entered a partial position when CAVA began to show signs of support after the price formed a Bull Flag into the 10-day EMA and the previous $67 price area.

CAVA 40 Breakout 6
Chart via Deepvue

Bull Flag Triggered

Date: May 5, 2024

A gap-up triggered the bull flag.

Oliver rounded out to a full position and raised his stop to below the low of the day.

Often when a strong stock resets you will be re-entering around the same area you previously sold.

CAVA 40 Breakout 7
Chart via Deepvue

Let It Trend

Date: May 6, 2024

Even though CAVA got a little ahead of itself we let the trade trend. Although the price became extended, this was viewed as the beginning of the move.

Oliver made note of the quick extended move but opted to keep the same stops to let the trade trend and ride the moving averages higher.

CAVA 40 Breakout 8
Chart via Deepvue

Reduced Into Strength

Date: May 10, 2024

CAVA gapped higher on heavy volume.

After the stock formed a small Base n’ Break we can definitively see a new supportive floor. Oliver raised his stop to the low of 5/7/23 to ensure profits.

At this point, we let the stock trend and use the moving averages to guide our stops.

CAVA 40 Breakout 9
Chart via Deepvue

10EMA Support

Date: May 19, 2024

CAVA began forming another basing pattern while it moved sideways allowing the moving averages to catch up to the price.

Oliver made a note to reduce his position if the price lost the 10EMA before earnings on 5/28 but would hold some based on the 20EMA.

CAVA 40 Breakout 10
Chart via Deepvue

All-Time Highs

Date: May 20, 2024

CAVA breaks out to all-time highs after another mini Base n’ Break.

Oliver raises his stop to the low of the base after every breakout. Waiting for another breakout allows you to maximize profits by allowing you to hold for the majority of the trend.

CAVA 40 Breakout 11
Chart via Deepvue

Trim Into Earnings

Date: May 28, 2024

The price gapped up in the morning and profits were taken, bringing it back down before earnings.

Oliver trimmed his position to an “earnings size” to secure profits while maintaining the potential to hold for future gains.

It is no surprise that CAVA gapped down after the positive earnings report as the price had a significant run leading into the close.

Oliver made a note that if the price finds support at the 20EMA he will look to start a second position, but would stop out of the current position if the price lost the 20EMA.

CAVA 40 Breakout 12
Chart via Deepvue

Earnings Reaction

Date: May 29, 2024

CAVA came down into the 75/76 level, undercut, and then ripped on higher volume. Some traders may have been stopped under the 20EMA but could have re-entered.

One of Oliver’s best buy areas is a loss and recapture of the 20EMA.

The pre-earnings position beginning at $69 plus today’s add at $75.43 has the core trade in the money with the stop raised to the $77 area.

CAVA 40 Breakout 13
Chart via Deepvue

Sell Strength

Date: May 30, 2024

CAVA’s earnings reaction brought the price close to $100 and Oliver exited about 1/3 of the total position as it quickly became short-term extended.

Swing traders enter stocks on pullbacks into support, and then sell them into strength.

If CAVA chops around and builds another base there may be an opportunity to add another position.

CAVA 40 Breakout 14
Chart via Deepvue

Inside Bar Triggers Another Add

Date: June 10, 2024

A bullish flag formation found support near the earnings day close. A new high over the inside day triggered another add with stops at the 10-day.

CAVA 40 Breakout 15
Chart via Deepvue

Let It Chop

Date: June 18, 2024

As expected CAVA needed time to chop around before being able to push out again. We are currently finding resistance at the previous highs and a few days of sideways action would be normal.

The original core position stops remain at the 20EMA with the higher cost position at the 10EMA. If it sets right Oliver is looking to find an additional buy area.

CAVA 40 Breakout 16
Chart via Deepvue

20EMA Catches Up

Date: June 27, 2024

Sideways choppy action allows the 20EMA to catch up to CAVA’s price.

When a stock’s price tightens a large move one way or the other is coming.

Tight price action also provides a low-risk area to increase exposure and raise stops

CAVA 40 Breakout 17
Chart via Deepvue

Failed Breakout

Date: July 8, 2024

When a breakout fails, be cautious of continued weakness. At this point, Oliver adjusted his game plan and raised all of his stops.

Half of the total position would be stopped if the price loses the 10EMA and the other half of the position will be stopped if the price loses the 20EMA.

CAVA 40 Breakout 18
Chart via Deepvue

Stopped Out With Breakdown

Date: July 9, 2024

Oliver notes a mentor stating a warning similar to the effect of “Failed three pushes higher leads to a shakeout.”

After the three tops formed, Oliver’s tightened stops all got hit when CAVA reversed lower.

CAVA 40 Breakout 19
Chart via Deepvue

Wrapping It Up

CAVA became a known IPO that had an incredible advance after it bottomed at the end of 2023.

When a Wedge Drop confirmed the first pullback, Oliver kept a close eye and waited for a confirmation of supportive price action. As the price found support on the weekly time frame, the daily chart formed a bullish engulfing candlestick.

Oliver made the most out of this 40% advance that lasted two months by buying a partial position, increasing the size, and then trimming it into strength. When the price found support Oliver increased the position size, and when the price became extended the position was reduced.

Trimming into strength provides a profit cushion for the remaining position to be held. The strongest stocks can be added to and sold into strength as they continue their advance.

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