The American retail company which is the United States’ largest supermarket by revenue, and the second-largest general retailer, Kroger Co. (NYSE: KR) seems to be getting ready for a surge as per its latest charts.
#1 Ascending triangle pattern: The daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. The breakout from the pattern usually signifies the start of an upmove and the breakout level of the triangle typically acts as a good support level.
#2 Price above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls currently have an upper hand.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line, as well as the ADX line, are currently above the (-DI) line.
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#6 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 considered as a potential buy signal.
#7 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.
#8 Price above MAs: In the weekly chart as well, the stock is trading above its 50-week as well as 200-week SMA, indicating that the bulls are in control.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level of KR is if it breaks out of the ascending triangle pattern and closes above the resistance area marked as a pink color dotted line in the weekly chart. This translates to a price of around $42.50.
TP: Our target prices are $46 and $52 in the next 4-6 months.
SL: To limit risk, place a stop at $40.40. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 8% to 22% in the next 4-6 months.
For a risk of $2.10, the target rewards are $3.50 and $9.50. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. 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 its sector.
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