Wall Street Eyes Kroger Stock After Breakout

Kroger is now trading between the 320-day moving average and the $28 level

by Josh Selway

Published on Nov 12, 2019 at 9:30 AM

Coming into the quarter we highlighted Kroger Co (NYSE:KR) and its 320-day moving average, a trendline that was acting as resistance. After the stock broke out last week thanks to the company's well-received analyst day -- where it released a strong full-year outlook -- this moving average may have switched roles, acting as support yesterday. KR will need the help on the charts, since the $28 level, site of the March bear gap, swiftly put an end to last week's gains. With the grocery name sitting in such a noteworthy spot on the charts, analysts continue to weigh in.

This morning, Deutsche Bank came through and upgraded its view to "hold" from "sell," and lifted its price target to $27 from $22 -- right in line with yesterday's close of $26.61. This is at least the fourth positive analyst note to come through on KR this month, and there's plenty of room for more. Specifically, 11 of the 15 covering brokerage firms still have "hold" or "strong sell" ratings.

What's more, short interest on Kroger has been declining sharply for months, falling from an August peak of 46.6 million shares, to the 31.4 million shares that are now held by short sellers. This covering trend could continue, too, since that figure represents a healthy 3.4 times the stock's average daily trading pace.

Some options traders are growing bullish, as well. Not only has call buying remained the clear favorite strategy of speculators at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), but there was a huge increase in open interest at the April 29 call during the past 10 days. Data confirms buy-to-open activity here, so some traders are betting on long-term upside for Kroger stock.

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