America’s largest supermarket by revenue and the second-largest general retailer, Kroger Co (NYSE: KR) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Channel Breakout: As you can see from the daily chart, the stock has been trading within a channel during the past few months. This is marked in the daily chart in pink color. Currently, the stock has broken out of the channel. Once a stock breaks out from a channel, it has the potential to move further up.
Daily Chart – KR
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This is a possible bullish sign.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX line has moved up from below –DI and +DI lines.
The +DI and ADX lines are also currently above –DI line. This indicates possible bullishness.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 Double Bottom Breakout: As seen in the weekly chart, the stock had recently formed a double bottom pattern. This is marked in the weekly chart in orange color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could possibly move upwards. Currently, the stock has broken out of the double bottom pattern, which is a possible bullish sign.
Weekly Chart – KR
#7 MACD Above Signal Line: In the weekly chart as well, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.
#8 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of KR above yesterday’s close. This translates to a price of around $33.75.
TP: Our target prices are $36 and $42 in the next 4-6 months.
SL: To limit risk, place stop-loss at $32.30. Note that the stop-loss is on a closing basis.
Our target potential upside is 7% to 24% in the next 4 to 6 months.
For a risk of $1.45, our target rewards are $2.25 and $8.25. This is a 1:2 and 1:6 risk-reward trade.
In other words, this trade offers nearly 2x to 6x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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