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Today, we’re opening a new bearish trade on Kroger (NYSE:KR). We have been watching the whipsaw in food commodity prices this week with a lot of interest. This is an issue for companies like KR, who have been hit hard in same-store sales from the decline in commodity prices.

Food deflation may be good for consumers, but it hurts retailer margins. Additionally, the failed deal with RiteAid (NYSE:RAD) has us concerned about the company’s plans to expand into smaller stores. This seems like a big setback and may reflect a lack of confidence amongst management.

From a technical perspective, KR is interesting, as it has just completed a large bearish divergence. The downside targets are between $32 and $30 per share, which could be realized in the short term if investors come back from the holiday without a lot of enthusiasm for the debt-heavy grocery chain.

‘Buy to open’ the KR February (2017) 34 Puts (KR170217P00034000) for a maximum price of $1.05.

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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.