CarMax Inc. (KMX) is the top gainer in the S&P 500 Thursday with the help of a 6% gain. This upgrade-inspired breakout move has pushed shares well past heavy resistance near the April highs. With a solid base now underneath, KMX is setting up for a new rally leg that could carry shares back up to its 2017 highs.
Over on Real Money, Jim Cramer gives advice to investors looking at how to play the Trump Trade. Get his insights or analysis with a free trial subscription to Real Money.
After putting in a slightly higher monthly high in mid February, KMX began a steep pullback. By early April the stock was drifting below major support near the 200-day moving average and had re-entered oversold territory. As earnings neared, shares were in a very vulnerable position, with loads of overhead supply in place.
On April 6, KMX put in a key upside reversal following its Q4 earnings report. The stock continued to recover through the remainder of the month, but was unable to break free of its 200-day moving average. Today shares have clearly taken out this key area and have left behind what could develop as a major base. In the near term, KMX investors should consider the stock a buy on weakness. Initial layer of support is near $62.00. If KMX can continue to build momentum above this level, a run back up to the 2017 peak near $59.00 is likely. On the downside, a close back below $58.00 would violate last week's low, sending a clear warning sign in the process.
KMX sports a fairly high short-interest ratio of 6.9. This will add considerable upside fuel as shares continue to put distance on the April high.