Take a look at the 1-year chart of CarMax (NYSE: KMX) below with added notations:
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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