The renewed growth in Carver stock came about after fresh support at the 180-day moving average
In June 2020, the US was in the midst of political turmoil as an uproar against systemic abuse of marginalized groups came to the fore. Back then, as a company, we wanted to show our support by looking at black owned stocks that you could invest in. One of the two names we examined was banking giant Carver Bancorp (CARV).
Carver is a holding company of Carver Federal Savings Bank, the largest black-run bank in the country. It was founded in 1948 to serve African American communities and is designated as the Community Development Financial Institution (CDFI) by the US Treasury Department. When we profiled the stock in June 2020, CARV was trading around the $ 16.80 mark, at a nearly ten-year high, with a number of moving averages showing up as support.
To take a deeper look at the current position of the stock, according to Thomson Reuters, CARV is the “most talked about stock in news on the social media platform Stocktwits for retail, with almost 94.45% the positive sentiment towards the stocks of the Reflect bank ”. This statement comes as no surprise given that short interest in the stock is currently at record levels.
In particular, short interest in Carver Bancorp stocks now stands at 272,367 stocks – an all-time high. This accounts for nearly 30% of the stock’s total available float, which brings these bearish bettors’ surrender – a short squeeze – into play. This short squeeze potential has drawn a deluge of retailers scouring Reddit forums in search of heavily short stocks. And all of that volume drove CARV to a high of more than a decade at $ 38.87.
Carver Bancorp hasn’t come this close to the round $ 40 mark since January 2011. This incredible regrowth has come on the heels of new support at the 180-day moving average – a trendline that presented resistance in June 2020 and has since swung to serve as stable bottom in 2021. Now the stock is showing an impressive 246% gain year over year and is 325% above its August 2020 low of $ 5.15.
In contrast, a savvy trader could look at this breakout and prepare for the next leg, a steep decline back into reality, in the same way that most meme stocks fall. This is certainly possible as the stock’s 14-day Relative Strength Index (RSI) is firmly in the “overbought” area at 75. As shown in the graph above at the bottom, the banking giant’s RSI rose into the 1990s in early June. In other words, context is important when it comes to assessing the feasibility and strength of a potential CARV pullback. With the RSI stepping in at much sharper levels recently, the stock’s retreat may not be as catastrophic, and long exposure to stocks can be protected by puts or other hedged option strategies.
Bernie Schaeffer’s subscribers Chart of the week received this comment on Sunday July 11th.