CarMax : This morning, CarMax announced second-quarter earnings of $54.3 million, or 50 cents per share, as total sales rose 18 percent to $1.93 billion. Analysts had predicted earnings of 41 cents per share on sales of $1.85 billion. The security gapped higher on the surprise and is currently up more than eight percent after tagging a fresh annual high. Were expectations a little low on this retailer heading into its report? Without a doubt. The stock's Schaeffer's put/call open interest ratio (SOIR) had risen to an annual high of 1.52 ahead of the report, while short interest had jumped 21 percent. This combination of low expectations and a strong earnings report indicated that the stock had the potential sideline money available to fuel additional gains. And it may still have room to rally. The stock has broken through resistance at the 36 level and is climbing along the support of its 10-day and 20-day moving averages. What's more, KMX has breached long-term resistance at the 39 mark. A continued unwinding of the pessimistic sentiment surrounding KMX should supply the stock with fresh buying strength.

Circuit City Stores: Sometimes the market gives you a stock that is just hard to figure out. Circuit City Stores had formed a head-and-shoulders pattern, which typically resolves itself in a drop for the shares. However, the stock surprised technicians when the company reported strong earnings and broke out to the upside. And unwinding bearish sentiment can't be used as the cause either. In fact, investors are relatively optimistic when it comes to CC, with a (SOIR) in the 11th percentile and a short-interest ratio of just 2.6 days to cover. However, Wall Street could help the stock, as 11 of the 18 analysts following the company rate it a "hold." Any upgrades (like the one from SunTrust today) could add some lift to the shares. What CC does have in its corner is a strong, long-term uptrend. The stock is consolidating into support at its 10-month moving average, which has ushered CC higher since August 2003.

Darden Restaurants: Darden Restaurants announced first-quarter earnings of $88.5 million, or 59 cents per share, as sales rose 3.3 percent $1.46 billion. Analysts had expected earnings of 58 cents per share on revenue of $1.46 billion. What's more, DRI boosted its forecast for the fiscal year ending next May, saying it expects earnings per share to increase 10 percent to 12 percent from a year earlier; the company had previously forecast earnings would increase nine percent to 10 percent for the fiscal year. Technically speaking, the shares gapped higher on the positive report, breaking through former resistance at the 39.50 level and bouncing off their 10-day moving average. What's more, DRI is in the process of bouncing off its 20-month moving average, which has guided the stock higher since July 2004.

Reynolds American: Reynolds American was slapped with a downgrade from "buy" to "hold" by Citigroup this morning. As a result, the shares have plunged nearly six percent in trading today, but are now neatly perched on technical support at their 80-day moving average. From an options perspective, the stock has hefty November put open interest at the 60, 55, and 52.50 strikes, which could act as a magnet during the short term should the security fail to hold support at its 80-day trendline. On the other hand, these bears could also fuel a rally if the shares succeeded in stabilizing at their 80-day moving average and the pessimists begin to unwind their bearish bets.

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