Show Me the CarMax

CarMax (ticker:$KMX) just reported earnings and beat street estimates. But the price action on the chart seems to have anticipated this beat. It had been in a descending triangle, with a base at 31.40, from mid February and broke out above that on Tuesday, driving through and finishing above both the 100 day and 50 day Simple Moving Averages (SMA’s). At the same time the Relative Strength Index (RSI) turned sharply higher and the Moving Average Convergence Divergence (MACD) indicator crossed bullishly positive.

Now that it has beat, the path higher gets another cheerleader in its camp. The next level of resistance comes at previous resistance of 36 from mid December and earlier in March. Followed by the previous peak at 37 February 18th. If it can get through those levels then the target for the break out of the triangle is next at 38.75. Getting long the stock with a stop at the 50 SMA at 33.91 (roughly 2%) gives a reward to risk ratio of 6:1 with a target gain of about 12% if you can get in at yesterday’s closing level. Maybe enough to buy a used car from them.

Good luck and trade’m well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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