Shares of grocery retailer Kroger Co (NYSE:KR) rallied sharply since last October and according to my proprietary market trend scanner algorithm are on the verge of pushing to medium-term bullish. While the “charts” have a clearly bullish tone to them in multiple time frames, the story also seems to have legs from a fundamental perspective.
So you know, Kroger reported its last batch of earnings in late November and now is not scheduled to report earnings again until March 1st. This is to say that no earnings report is to be worried about for active investors and traders for another while.
The 50% drop in KR stock from late 2015 into the second half of last year did get the company to take action, which in many ways I would classify as a real turnaround story. Kroger is now undergoing smart modification of its stores to appeal better to the various geographies.
The online grocery game too is not something the company wants to win, and as a result the company is going through an entire initiative of improvements in its ordering platform.
On the charts too the story seems to line up … and that both from a multiyear well as a multiweek/month time frame.
KR Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the longer-term weekly chart, we see that as a result of the sharp multimonth rally off the September 2017 lows the stock in December arrived at a crucial diagonal line of resistance from the 2015 highs and connects the series of lower highs since.
This juncture also coincides with a simple horizontal line of resistance. In other words, if and when KR stock should be able to overcome this technical area of confluence resistance around the $28.50 area, it would create an important higher high for the first time since the 2015 top.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we can see this technical confluence resistance area even better. Note that although KR stock did gap higher and rally following the November earnings report, it has since also largely been in a constructive consolidation phase right below this technical resistance area. Both the turnaround story as well as the charts look attractive enough to me to add Kroger stock as one of my ‘best ideas’ for 2018.
If you would like to find out the rest of my 2018 themes, particularly the ones for the first quarter, please join the special 2018 Q1 trading and investing themes webinar today by registering here.
From here, if and when KR stock can clear above the $28.50 area solidly and at least on a daily closing basis, active investors and traders could try the stock from the long side with a next upside target in the low $30s, i.e. say the $32 area for now … one step at a time.
Check out Anthony Mirhaydari’s Daily Market Outlook for Jan. 11.
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