The current short interest as a percentage of the float for CarMax stands at 5.3%. That means that out of the 227.56 million shares in the tradable float, 12.13 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a short-covering rally if the bulls get the earnings news they're looking for.

From a technical perspective, KMX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months and change, with shares moving higher from a low of $28.04 to its recent high of $36.65 a share. During that uptrend, shares of KMX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of KMX within range of triggering a major breakout trade post-earnings.

If you're in the bull camp on KMX, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance at $36.65 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 2,238,720 shares. If that breakout hits, then KBH will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets are $40 to $43 a share.

I would simply avoid KMX or look for short-biased trades if after its report the stock fails to trigger that breakout, and then drops back below its 50-day at $34.10 a share with heavy volume. If we get that action, then KMX will set up to re-test or possibly take out its next major support levels at $32.79 to $31 a share. Any high-volume move below those levels will then put its 200-day at $30.86 into focus for shares of KMX.

To see more potential earnings short squeeze plays, check out the Earnings Short Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including and You can follow Pedone on Twitter at or @zerosum24.

If you liked this article you might like

The #DigitalSkeptic Guide To Mobile Gadgets that Won't Break on You

5 Telecommunications Stocks Nudging The Industry Higher

Research In Motion Ltd (RIMM): Today's Featured Telecommunications Laggard

5 Stocks Pulling The Telecommunications Industry Downward

Research In Motion Ltd (RIMM): Today's Featured Telecommunications Laggard