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Grocery-Store Stocks: A Mixed Bag

If you're going to play the likes of WFM or SWY, do so individually, not as a group


Grocery-store stocks aren’t on the top of the list of many traders, but the 35% rally off the summer 2012 lows in Kroger (NYSE:KR) caught my interest and led me to look at its competitors’ stocks.

After looking over the charts of some of these companies, I think they’re really a mixed bag when it comes to their patterns. But while its difficult to see lots of unanimity from a technical analysis point of view, each of the stocks I looked at offers interesting opportunities from time to time.

On the chart below, I added the following companies: Whole Foods (NASDAQ:WFM), The Fresh Market (NASDAQ:TFM), Safeway (NYSE:SWY) and Kroger. All four lifted off the 2011 lows, but divergence set in after the first quarter of 2012. Besides the fact that all stocks are higher this year, as far as trading setups look like in the intermediate-term, there isn’t much resemblance.

Whole Foods — which, from a swing trading point of view is the best of breed, at least in my humble opinion — has seen an amazing rally over the past three years and still doesn’t look tired … although it’s somewhat too early to tell. In the near-term, WFM was battling with resistance near $97 and as of this morning (post-earnings) has found its support area near $88 again. A breakout of the range should be tradable in either direction. On the downside, a break of $87-$88 could lead to a move down to the low $80s.

Safeway currently is consolidating right at a multiyear downtrend line dating back to 2007. Thus, the analysis on SWY should be through a somewhat longer-term lens, but a solid break past resistance could move this puppy toward $24 in the not-too-distant future.

Kroger, with its steep rally off the summer 2012 lows, is now approaching levels not seen since 2008. Thus, I wouldn’t advise investors to try to chase KR higher for the time being.

And last but not least, The Fresh Market is trading in no-man’s land with important support around $44.50, and overhead resistance at the 200-day simple moving average close to the $54 mark.

So, there you have it: a mixed bag of groceries with stocks setting up in all directions.

As far as my two cents go, play them individually rather than as a group.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.

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