Vroom Stock Forecast: VRM continues advance on Friday

Vroom (VRM) stock has continued advancing on Friday a day after retail splurged and pushed shares up 36.4% to $1.61 a share. At the time of writing shares are up 7.5% to $1.73.

Vroom stock news

The major price action from Thursday appears to be due to retail trying for another short squeeze. At the end of May VRM had more than 29% of its float sold short. Now the rumour is that about 56% has been sold short toward the end of June.

Vroom has been in an extreme downtrend since touching as high as $75 back in September 2020. The VRM share price has lost as much as 98% since that all-time high. The fact that Vroom is unprofitable has been hurting it in this new environment of higher interest rates. More importantly, the bubble in used cars appears to be over now that factories are churning out new vehicles as fast as the semiconductor shortage will allow. Vroom was unable to create profits even during 2021's absurd advance in used car prices, so the thinking goes that its business model will never be able to pivot toward profits at a time when used car prices are falling.

Between 2020 and 2021, revenue exploded from $1.36 billion to $3.18 billion, but losses exploded too. In its most recent quarter, Q1, Vroom's losses exceeded $310 million.

Vroom stock forecast

Despite VRM stock's advance on Thursday and Friday, both sessions show that the stock is having trouble conquering the $1.80 level. In the past two months, the $1.80 price level has held up as resistance on eight seperate occasions, so it makes sense that bulls are taking profits here. A close above $1.80 on the daily chart is the necessary sign that this rally could continue. Otherwise, VRM will likely trade down once again to support at $1.08. This support price worked first on May 9 and then again for four sessions in a row in mid-June.

Two other signals may emerge momentarily however. If the Moving Average Convergence Divergence (MACD) indicator drives above the zero threshold and the 9-day crosses above its 21-day counterpart, then this rally could have legs. Both indicators are moving steadily in that direction.

VRM daily chart

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