CAVA Pullback Puts Historically Bullish Signal in Focus
Key takeaways
- CAVA CAVA Group Inc (NYSE:CAVA) has pulled back since its early-June rally, though the shares are still up 33.3% year to date.
- This setup has appeared three times over the last decade, after which the stock was higher one month later 100% of the time, averaging a large 24.6% gain.
- Short covering could provide an added tailwind, as short interest represents 13.3% of the stock s available float.
CAVA CAVA Group Inc (NYSE:CAVA) has pulled back since its early-June rally, though the shares are still up 33.3% year to date. The equity is also testing support at its 126-day moving average (representing roughly half a year of trading), a trendline with historically bullish implications.
According to Schaeffer s Senior Quantitative Analyst Rocky White, CAVA is trading within 0.75 times the 126-day moving average s 20-day average true range (ATR), after spending at least 80% of the previous two weeks and 80% of the prior 42 trading sessions above that trendline. This setup has appeared three times over the last decade, after which the stock was higher one month later 100% of the time, averaging a large 24.6% gain. A similar move from the stock s current perch at $78.26 would rise to $97.51.
Short covering could provide an added tailwind, as short interest represents 13.3% of the stock s available float. It would take shorts nearly five days to buy back their bearish bets, at CAVA s average pace of trading.