Technical Setup Makes Kroger Stock a Solid Bullish Pick

KR looks ripe for a shift in sentiment among the brokerage bunch

Feb 15, 2022 at 10:40 AM
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Grocery store stock Kroger Co (NYSE:KR) saw a downgrade from Citigroup on Jan. 28 and promptly formed a doji pattern. Since then, the security has been trading higher, boasting a 38% year-over-year lead.
 
Despite this bullish technical setup, short-term options traders have rarely been more put-biased. This is per KR’s Schaeffer’s put/call open interest ratio (SOIR) of 1.52, which stands higher than 90% of readings from the past year. The options pits have been put-heavy overall, with the top five open positions being puts, and an unwinding of some of this pessimism could put ample wind at the stock’s back.
 
The stock looks ripe for a shift in sentiment among the brokerage bunch, too. Just two of the 16 in coverage call KR a “strong buy,” compared to 10 “hold” ratings and four “strong sell” recommendations. Plus, the 12-month consensus price target of $46 is a slight discount to Friday’s close
 
It looks like an opportune time to take advantage of these tailwinds with options. The equity’s Schaeffer’s Volatility Index (SVI) of 31% stands in the 31st percentile of its annual range, meaning options traders are pricing in relatively low volatility expectations right now. Plus, its Schaeffer’s Volatility Scorecard (SVS) ranks at 72 out of a possible 100, implying that KR has outperformed these traders’ volatility expectations of late.
 
Finally, our recommended call has a leverage ratio of 7.4 and will double in a 12.1% jump in the underlying stock.

 

Subscribers to Schaeffer's Weekend Trader options recommendation service received this KR commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
 




 
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