Is There Life After Amazon for Kroger?

 | Oct 12, 2017 | 10:39 AM EDT
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Kroger Co. (KR) has been showing a different trading pattern recently. When we last reviewed KR, we liked what we saw, but that positive viewpoint was totally blown out of the water as prices collapsed from $30 to nearly $20 in just a few sessions. Prices recovered for a few weeks into early August and then traded down to $20, where it has tried to stabilize again.

Let's check out our charts and indicators again to see if this new lower price level is a better location for a new base pattern.

In this daily bar chart of KR, above, we can see that prices have held the $20 level and have bounced to the underside of the declining 50-day moving average line. The volume of trading has been heavier in the past two months than most of the rest of the year. Heavier volume at a potential price low can mean that aggressive sellers of KR are meeting aggressive buyers of KR, and prices are holding in a stand-off as shares move from weak hands to strong hands.

The daily On-Balance-Volume (OBV) line has been roughly moving sideways the past two to three months. A rising OBV line would be better, but after the declines seen since November, sideways is not too bad. The momentum readings in August and September show equal lows compared to lower lows in price for a bullish divergence. This bullish divergence could help to set the stage for KR to rally into year-end.

In this weekly bar chart of KR, above, we can see the long decline in the price of KR from above $42 to around $20 now. Prices are below the declining 40-week moving average line. The weekly OBV line is bearish, but the MACD oscillator is close to a bullish crossover from below the zero line. This would be a cover shorts signal for KR.

In this Point and Figure chart of KR, above, we can see a potential upside price target of $24-$25.

Bottom line: KR may need more downside testing and base building in the weeks ahead, but for now the worst may be over.

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