NEW YORK (TheStreet) -- CarMax (KMX) reports quarterly earnings before the opening bell on Friday. Despite missing analysts' estimates three months ago, it's become a momentum stock, setting a new all-time intraday high at $60.66 on Dec. 11. Analysts expect that declining gasoline prices led to improved sales of used cars in the quarter that ended in November.
Analysts expect CarMax to report earnings of 64 cents a share, but given missed earnings in three out of the last four quarters, shares have been volatile. One factor that could force shares to a new high following earnings is that the stock has recently been reported as being the #11 company on the list of most-shorted stocks of the S&P 500 (SPY) . Let's look at the daily and weekly charts first, and then present the investment profile with exit strategies.
Here's the daily chart for CarMax.
Courtesy of MetaStock Xenith
The daily chart for CarMax ($60.11) shows that the stock has had a volatile ride in 2014, after missing three out of the last four quarterly earnings reports. The stock began the year below its 200-day simple moving average (green line) at $47.53 on Jan. 2. CarMax traded back and forth around the 200-day SMA until April 3. When the company reported an earnings miss on April 4, the stock declined to its 2014 low at $42.54 on April 15. From the 2013 high at $53.08 on Dec. 19 to the April 15 low, the decline was 20%.
Talk about volatility!
After reporting an earnings beat on June 20, the stock gapped 19% higher from the June 19 close at $45.28 to as high as $53.67 on June 20. The stock moved sideways since then until the earnings miss on Sept. 23, when the stock gapped lower by 11% from $52.91 on Sept. 22 to $47.05 on Sept. 22.
Weakness continued to as low as $43.27 into Oct. 15 before the stock began a momentum runup helped by the market and by the conjecture that the company would benefit from renewed demand for used cars, given the lower gasoline cost.