The Kroger Co. (KR) beat earnings per share (EPS) estimates on June 18, but the stock dropped to a test of its quarterly value level at $30.81. The stock then rebounded to $33.43 on June 25 and today is holding its monthly pivot for June at $32.65. The major supermarket chain is above a golden cross on its daily chart, and its weekly chart is positive.

Kroger stock closed Thursday, June 25, at $32.78, up 13.1% year to date and in bull market territory at 58.4% above its low of $20.70 posted on July 23, 2019. The stock is also in correction territory at 11% below its March 18 high of $36.84. The stock is fundamentally positive, with a P/E ratio of 12.16 and a dividend yield of 1.95%, according to Macrotrends.

The daily chart for Kroger

Daily chart showing the share price performance of The Kroger Co. (KR)
Refinitiv XENITH

Kroger stock has been above a golden cross since Oct. 31, when the 50-day simple moving average rose above its 200-day simple moving average to indicate that higher prices would follow. This tracked the stock to its March 18 high of $36.84.

The stock quickly plunged by 25.8% to a low of $27.33 on March 26. Kroger rebounded above its 50-day simple moving average on March 31 and began April trading back and forth around its second quarter pivot at $30.81.

As June began, Kroger stock has was trading around its monthly pivot at $32.65, which held again today. The stock is now above its 50-day and 200-day simple moving averages at $32.55 and $29.13, respectively.

The weekly chart for Kroger 

Weekly chart showing the share price performance of The Kroger Co. (KR)
Refinitiv XENITH

The weekly chart for Kroger is positive, with the stock above its five-week modified moving average of $32.40. The stock is also above its 200-week simple moving average, or reversion to the mean, at $27.63. This average had been a magnet between the weeks of Dec. 13 and March 27.

The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 60.39 this week, up from 57.78 on June 19.

Trading strategy: Buy Kroger stock on weakness to its quarterly pivot at $30.81 and to its 200-day simple moving average at $29.13. Reduce holdings on strength to its annual risky level at $44.37.

How to use my value levels and risky levels: The stock's closing price on Dec. 31, 2019, was an input to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close, and the monthly level for June was established based upon the May 29 close. New weekly levels are calculated after the end of each week, while new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, and annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and the lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an "inflating parabolic bubble" formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered "too cheap to ignore," which is typically followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.