A key level of resistance has emerged in CarMax’s (KMX) chart. If this level is surpassed, a breakout is expected.
KMX is one of the largest retailers of used vehicles in the United States. The company also offers customers a full range of related services such financing and the sale of extended warranties, accessories, and vehicle repair services.
The company is benefiting from an increased demand for used cars as new car manufacturing at many companies is behind schedule due to pandemic shutdowns and a worldwide chip shortage. Its omni-channel offerings have improved the customer shopping experience and should bolster revenues in the long-term.
KMX has a current ratio of 2.4, which means it has more than enough liquidity to handle short-term obligations. The company also has a respectable return on equity of 17.1%, which indicates efficiency.
In its most recent quarter, earnings per share were down slightly at 2.3% year over year. Though, revenue increased 21.4% year over year. The stock appears a bit overvalued with a forward P/E of 22.78.
KMX’s stock price has shown bullish long-term momentum, which has resulted in a Momentum Grade of A in our POWR Ratings system and is represented in the chart below.
Take a look at the 1-year chart of KMX below with added notations:
Chart of KMX provided by TradingView
KMX has recently stalled at the same $136 resistance level (red), which is also a 52-week high, multiple times since the beginning of March. The stock fell back at the end of that month, but now seems to be making another run higher.
A solid close above that $136 mark should lead to much higher prices for the stock. The possible long position on the stock would be on a breakout above that level with a protective stop placed under it.
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KMX shares were unchanged in premarket trading Wednesday. Year-to-date, KMX has gained 40.85%, versus a 12.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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