Items such as hand sanitizer, toilet paper, and bottled water have flown off shelves over the past week as consumers prepare for an outbreak of the deadly coronavirus in the United States. Furthermore, limited delivery availability warnings from e-tailing giants Amazon.com, Inc. (AMZN) and Walmart Inc. (WMT) have added to the frenzied buying at brick-and-mortar stores in scenes that give reality TV show "Doomsday Preppers" a fleeting moment of relevance.
"Panic buying is a self-fulfilling prophecy. If everyone thinks things are going to run out, they go and buy out things and they do run out," Karen Girotra, professor of operations at Cornell University, told USA Today.
As retailers scramble to restock their supplies, traders may find buying opportunities in companies that manufacture and/or sell these in-demand staple products. Let's take a further look at three such stocks and use technical analysis to identify possible entry points.
Kimberly-Clark Corporation (KMB)
Kimberly-Clark Corporation (KMB) manufactures and markets personal care and tissue products under the Kleenex, Scott, WypAll, Kimtech, and KleenGuard brands. As well as getting a boost from increased toilet paper sales, the 148-year-old consumer defensive stock should benefit from its K-C Professional segment that sells workplace safety and sanitary products such as wipers, soaps, and sanitizers. Kimberly-Clark shares have a $50.06 billion market cap, offer a 2.99% dividend yield, and are trading almost 8% higher on the year as of March 9, 2020.
Kimberly-Clark stock has traded in a 20-point range since June, threatening in recent sessions to break out above crucial overhead resistance at $147.50. Traders should look for entry points near $141, where price finds vital support from second quarter swing highs and the 50-day simple moving average (SMA). If the stock falls below this level, the trading range's lower trendline provides major support at $127.50.
The Clorox Company (CLX)
Oakland, California-based The Clorox Company (CLX) sells a variety of consumer staples products, including cleaning supplies, laundry care, water-filtration products, and personal-care items. Last week, Costco Wholesale Corporation (COST) and Target Corporation (TGT) sold out of Clorox Disinfecting Wipes and all-purpose cleaner as panic buying intensified amid the U.S. Environmental Protection Agency (EPA) adding these products to a list of disinfectants to protect against the spread of the coronavirus. As of March 9, 2020, Clorox stock issues a 2.41% dividend and has gained 14.79% year to date (YTD).
The company's share price broke out from a 14-month trading range in early February and has continued rising against a backdrop of heightened volatility. Interestingly, share volume has increased significantly in recent weeks, indicating possible accumulation from institutional money. Those who want to buy the stock should look for a retracement to the top of the previous range at $162.50, which now provides a key support level.
The Kroger Company (KR)
The Kroger Company (KR) operates roughly 2,700 supermarkets in which 82% of locations have in-store pharmacies. The grocer said that sales of staples, including water, hand sanitizers, hand soap, paper towels, and some processed foods, had jumped in recent days. To meet increasing demand, the $25.65 billion company has taken the extraordinary step of limiting how many sanitization and cold and flu products customers can purchase in stores and via its website, according to The Wall Street Journal. CEO Rodney McMullen said that it was too early to determine the impact of coronavirus-induced buying but that the company had established an internal task force to track the situation. As of March 9, 2020, Kroger stock has risen 11.07% YTD and pays a 1.91% dividend yield.
Since bottoming out just above $20 in July last year, Kroger shares have traded within a steady uptrend, with bullish momentum accelerating last week as investors bet on shoppers continuing to stockpile household essentials. Instead of chasing recent gains, traders should think about placing buy limit orders between $28 and $29, where the stock encounters a confluence of support from the December swing high, rising 50-day SMA, and an eight-month uptrend line.