Last week Wednesday September 21st, 2016, CarMax [KMX] released 'bad' Q2 earnings.
I decided to purchase a few Oct. 21st 55.00 puts @ $2.54/contract on the same day.
For a refresher let's look at Thursday's candle stick on the daily chart (Sept. 29, 2016).Â
See the chart below (The blue lines are support/resistance levels).Â
Here's the link to view the first post in this series: ~ CarMax (KMX) Analysis + Option Trade Log  9/29/2016 (Bearish swing on bad Q2 earnings) ~Â
Now, let's take a look at how KMX traded on Friday (Sept. 30, 2016) using a chart with a 5 min time frame (see below):
Lastly, let's take a look at how KMX traded on Friday using a chart with the daily time frame (see below):
On Friday KMX and majority of the stock market traded bullish. KMX bullishly traded up into a support / resistance level and closed at $53.35 / share, a +2.26% gain for the day. This strong bullish move was able to erase majority of the loses the stock faced over the trading week but towards the end of the trading day there was some selling pressure on the stock.
Although KMX traded bullishly with a +2.26% gain I am taking in to consideration that on Friday majority of the stock market traded bullishly. Another result of this bullish gain is that traders who were bearish on KMX most likely exited from their trades to lock in profits / losses. One other factor I am considering is that the stock's price is currently at a support / resistance level and the candle stick formed on a daily chart is a doji candle - indicating indecision.
As I said what KMX might do, the stock's price bounced off of a lower support / resistance level and has bullishly traded into a higher support / resistance level. A bullish move on Monday for KMX will be a signal that the stock's price has found a bottom and is starting to reverse. A bullish move on Tuesday for KMX will be confirmation that the bearish trend on KMX was short-term and has most likely ended. Monday's and Tuesday's candle sticks will be the deciding factor for me on if I,
a) exit my Oct. 21st 55.00 puts or b) continue to hold the puts.Â
We shall see...
Until next time,
- Ford Mogul
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