Friday, March 27, 2015

CarMax, Inc (NYSE: KMX)

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. It operates in two segments, CarMax Sales Operations and CarMax Auto Finance. It sells vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions, as well as sells new vehicles under franchise agreements. The company also provides customers financing alternatives through its finance operation, CarMax Auto Finance, as well as through its third-party financing providers. In addition, it offers a range of other related products and services, including the appraisal and purchase of vehicles directly from consumers; sale of extended service plans and guaranteed asset protection services; and vehicle repair services.
Take a look at the 1-year chart of CarMax (NYSE: KMX) below with added notations:
1-year chart of CarMax (NYSE: KMX)
After bolting higher from mid-October until the end of December, KMX has been trading sideways over the last 3 months. During the sideways move the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
KMX’s rectangle pattern has formed a resistance at $68 (red) and a $62 support (blue). At some point the stock will have to break one of the two levels.

The Tale of the Tape: KMX is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $62 or on a breakout above $68. The ideal short opportunity would be on a break below $62.
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