Last Friday Jim Cramer told viewers of "Mad Money" his game plan for this week. For Tuesday, Cramer said he will have his eyes on Carmax Inc.'s (KMX) earnings, expecting them to be strong as people flock to the suburbs from cities. Carmax is expected to report fiscal third-quarter results before the opening bell that day.
We reviewed Carmax's charts back on Sept. 21 and wrote at the time, "KMX has rolled over and is pointed down. We have a Point and Figure chart target of $95, but the key level to worry about is the June/July lows in the $85 area. Drive and trade cautiously."
In this updated daily bar chart of KMX, below, we can see that by the end of October KMX tested the $85 level but did not break it. Prices subsequently recovered to the $100 area and are trading above the now-rising 50-day moving average line. The slower-to-react 200-day moving average is neutral/flat. The On-Balance-Volume (OBV) line has declined from late September and did not improve when prices traded up from late October. This movement in the OBV line tells us that sellers of KMX have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has been hugging the zero line in recent weeks.
In this weekly bar chart of KMX, below, we see a mixed picture. Prices are trading above the slightly rising 40-week moving average line. The weekly OBV line shows little improvement from late October and the MACD oscillator has narrowed toward a possible future bullish crossover.
In this daily Point and Figure chart of KMX, below, we can see an upside price target in the $131 area but also that a trade at $91.77 would weaken the picture.
Bottom line strategy: Traders could look to buy a dip to $95 risking to $90. Our potential price targets are $110 and then $130.
