In our April 6 review of CarMax (KMX) we were reluctant to recommend the long side of the stock, writing, "Traders should steer clear of the long side of KMX." The company just reported their latest quarterly numbers Friday morning and beat EPS and revenue expectations.
Let's check out the charts again.
In this daily bar chart of KMX, below, we can see that prices have struggled since our early April review. KMX is poised to test the declining 50-day moving average line again. The slower-to-react 200-day line is also in a decline and intersects up around $116 or so.
The On-Balance-Volume (OBV) line is showing improvement from late April and signals a shift from aggressive selling to aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator is showing improvement but has yet to make a sustained rise above the zero line.
In this weekly Japanese candlestick chart of KMX, below, we can see a recent harami pattern in the past two weeks. Bullish confirmation this week would be welcomed to identify a bottom reversal. The slope of the 40-week moving average line is still negative.
The weekly OBV line is still pointed down but could be bottoming. The MACD oscillator has crossed to a cover shorts buy signal but it has a ways to go before a buy signal.
In this daily Point and Figure chart of KMX, below, we can still see a downside price target of $74 but a trade at $93.61 will improve the picture.
In this weekly Point and Figure chart of KMX, below, we can see a downside price target in the $79 area.
Bottom line strategy: Aggressive traders could go long KMX on strength above $93.61. Look for gains into the $110-$120 area.
