CarMax is America’s largest used-car retailer. It currently has more than 200 stores across the US. The used-car business is a low margin game and control over inventory is key to success. CarMax is an industry leader in that regard, as it turns inventory faster than any of its competitors. Even though short-term concerns due to the pandemic remain, the long-term market for used cars is projected to grow.
CarMax’s stock has been in a long-term uptrend for the past 10 years, as evident in its monthly chart. The stock had experienced a significant fall of 44% in February and March of 2020. The price fell below the bottom of the long-term trend. However, in April, the stock bounced back up 46% in April from a low of 50.
In May, the stock has remained above the bottom of the long-term trend. The level at around 76 is a key resistance level. Recently, the price has crossed this level and a further advance can lead to a breakout all the way to the top of the long-term trend at around 105. Stop loss can be placed below the bottom of the long-term trend at around 56.
Positions taken with entry point at $76.69 stop loss 32% below at $52. Take profit for short term investors at $103 giving a profit of 34%.