Grocery store retailer Kroger Cie (NYSE: KR) is down 1.2% to $ 40.45 this afternoon, although it earned Morgan Stanley’s price target a hike to $ 34 from $ 31 earlier. Despite the bullish note, the cover analyst said the stock was starting to normalize after a strong 2020, noting that a slowdown in industry sales in 2022 is not appreciated on Wall Street. However, there may still be hope for short-term safety as KR has just returned to a trendline with historically bullish implications, which could boost stocks in the coming weeks.
More precisely, Kroger share has just approached a standard deviation of its 80-day moving average, after spending some time above that trendline. According to data from Rocky White, senior quantitative analyst at Schaeffer, nine similar signals have occurred in the past three years. The stock posted a positive return one month later in 89% of those cases, with an average gain of 4.5%. From its current location, a similar move would put KR above the $ 42 mark, which is closer to its September 2 high of $ 47.99.
Short sellers have already hit the exits, although Kroger’s shares still look poised for a short squeeze. Short-term interest is down 14.5% in the last two reporting periods, but the 38.37 million shares sold short represent 5.2% of the available free float of the shares, or nearly a week of repressed purchasing power.
A relaxation of pessimism in options can also help stocks. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), the 50-day buy / sell volume ratio of KR is above 98% of the readings of the ‘last year, which means that the long put options were being picked up at a clip faster than usual.
Echoing this, the Kroger Schaeffer share’s open put / call (EVENING) interest ratio of 1.18 is above 82% of the last 12-month reading. This indicates that short term options traders have rarely been more put oriented.
Now looks like a good opportunity to weigh in on KR’s next move with options. The Schaeffer Stock Volatility Index (SVI) of 24% sits in the relatively low 15th percentile of its annual range, suggesting that options players are currently evaluating low volatility expectations for the stock.