Kroger Stock a Solid Pick for Low-Risk Bulls

A historically bullish signal has been flashing for Kroger stock

Managing Editor
Mar 4, 2022 at 12:18 PM
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Subscribers to Chart of the Week received this commentary on Sunday, February 27.

In our Chart of the Week publication, we like to bring forward any unique stocks, trendlines, or patterns that may be of interest to the majority of our subscribers. This week we are diving into Kroger Co (NYSE:KR), which -- as pointed out by our very own founder and CEO Bernie Schaeffer -- has several redeeming qualities going for it; both technical and historical. Below, we are going to dig further into several theories and drivers, which could be indicating that now is the perfect buying opportunity for bulls to move in on KR.

Although the shares of grocery chain KR have cooled off since hitting their January record peak of $50.15, the equity has been a long-term outperformer, and only looks to be readying for its next surge higher. Kroger stock has tacked on 42% over the past 12 months, and with aid from the 80-day moving average, has been able to bounce back from several brief pullbacks. In fact, Bernie noted that the moving average has been shown nothing but respect from KR shares -- whether it was performing as support or resistance over the past several years; an uncanny characteristic for such a trendline.

More specifically, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, comparable pullbacks have occurred six times over the past three years. The security enjoyed a positive, one-month return almost 70% of the time, while averaging a 3.4% pop. A similar move from the equity’s current perch of $46.22 would put KR back within a chip-shot of its January record peak.

KRdailycotw

Meanwhile, looking toward the options pits, puts rule the roost. This is per Kroger stock's 10-day put/call volume ratio of 1.37 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio sits higher than all but 6% of readings in its annual range, suggesting a much healthier-than-usual appetite for puts in the last two weeks.

Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 1.57, which ranks in the 90th annual percentile -- highlighting a massive appetite for puts among short-term speculators, as well. Those options traders are in luck, because the stock's Schaeffer’s Volatility Scorecard (SVS) sits at a 79 out of 100. This means the security has exceeded option traders' volatility expectations during the past calendar year.

While trendlines and technical data can be subjective, the historically bullish signal that is now flashing toward Kroger stock is an intriguing takeaway. Amid the broader geopolitical tensions that have triggered a volatile market for both stocks and commodities, such a foundation could bode well for even a low-risk bull looking to bet on KR.

 




 
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