Kraft Heinz Stock Slapped With Bear Note

KHC has encountered stiff resistance at its 60-day trendline

Managing Editor
Feb 5, 2019 at 9:41 AM
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The shares of Kraft Heinz Co (NASDAQ:KHC) are 0.4% lower to trade at $47.53 this morning, after Deutsche Bank downgraded the food concern to "hold" from "buy," while trimming its price target to $52 from $58. The analyst in coverage noted that increased efforts from store brands have taken a share of Kraft Heinz's major categories. 

Kraft Heinz stock stumbled to close out 2018, falling to a record low of $41.60 on Dec. 26. While the shares rallied 11.7% in January, the momentum appears to have stalled at their 60-day moving average. This trendline has kept a lid on breakouts since early August. 

There is certainly room for more bear notes. More than half of the 13 brokerages in coverage of KHC rate it a "strong buy," and the stock's consensus 12-month price target of $56.05 is an 18.1% premium to last night's closing perch of $47.73. 

In the options pits, the mood is almost exclusively bearish. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 3.19 ranks in the 100th percentile of its annual range, meaning puts have been bought to open at a near-climactic pace relative to calls in the last two weeks.

The good news for options traders is that the stock's Schaeffer's Volatility Scorecard (SVS) sits at 86 out of a possible 100, meaning KHC has handily exceeded options traders' volatility expectations in the past year -- a boon for would-be premium buyers.

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