The Kroger Co. (KR) is a full-service supermarket offering food stuffs, pharmacy and convenience items. The stock took it on the chin when Amazon.com, Inc. (AMZN) announced that it would be purchasing Whole Foods Market in mid-June. Shares of Kroger closed at $30.28 on June 14 and gapped lower in each of the next two days, trading as low as $20.46 on June 16, which equated to a crash of 32.4%.
Shares of Kroger continued to slide and did not bottom until reaching the post-election low of $19.69 on Oct. 2. The stock closed Tuesday, Nov. 29, at $23.56, down 31.7% year to date and in bear market territory at 35.3% below its post-election high of $36.44 set on Dec. 19, 2016. Since the Oct. 2 low, Kroger has recovered by 19.7%, and the stock is poised to add to those gains if there is a positive reaction to earnings Thursday morning.
Analysts expect Kroger to post earnings per share of 40 cents to 43 cents when it reports results before the opening bell on Nov. 30. It will be interesting to hear guidance on how the grocery giant plans to compete with Amazon.com. Initiatives to combine discounts with on-line shopping and in-store pickup should be part of the game plan. (See also: Kroger Faces Battle Against Amazon.com: Barclays.)
The daily chart for Kroger
The daily chart for Kroger shows that the stock has been below a "death cross" since March 7, when it closed at $28.81. A "death cross" occurs when the 50-day simple moving average declines below the 200-day simple moving average, indicating that lower prices lie ahead. This bearish signal provided an early warning that a time bomb was ticking for the stock.
The weekly chart for Kroger
The weekly chart for Kroger is positive, with the stock above its five-week modified moving average of $22.36 but well below its 200-week simple moving average, also known as the "reversion to the mean," now at $31.15. This key average was last tested at $30.05 during the week of March 3, which was another early warning. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week rising to 69.50, up from 57.08 on Nov. 24.
Given this chart and analysis, my trading strategy is to buy in anticipation that the recovery is intact and that my quarterly pivot of $24.82 will be a magnet, and to reduce holdings on strength to my annual and semiannual risky levels of $33.30 and $37.56, respectively. (For more, see: Kroger Can Best Weather Grocery Price War: Moody's.)