While investors have been fascinated by the latest growth stories driven by artificial intelligence, I’m actually seeing more and more opportunities in the defensive areas of the market. These stocks have generally underperformed for much of 2024, but recent price and momentum improvements are creating a strong pattern with upside potential. Kroger Co. (KR) shares are facing the threat of a new 52-week high this week, and a breakout of current levels would confirm one of the most bullish price patterns in the technical toolkit: the Cup with Handle pattern. We can see the development of the cup-and-handle pattern on the daily chart, including the six-month round bottom pattern and subsequent brief pullback in October. The key to a cup with a handle is the “edge” of the cup, which is essentially the trend line connecting the highs during the price pattern. It’s worth noting that the Handle Cup pattern only comes into effect when price breaks above this resistance line, as this signals an influx of new buying power, potentially pushing the price higher. This means we need to see a valid break above $57.50 to complete the bullish signal. Other indicators on the chart seem to indicate that a breakout may be imminent, especially the RSI which has been in bullish territory since July of this year. I also drew a trend line connecting the major lows from late 2023. Looking at Kroger’s weekly chart now, we can see that the recent price action is actually part of a larger handle cup pattern that stretches back to early 2022. The frame is much longer. Similar to the daily chart, we can see that the weekly RSI has been in bullish territory for the past five years. During healthy bullish phases, the RSI will typically become overbought on rallies and remain above the 40 level on price retracements. This sustained bullish momentum range indicates a bullish long-term trend, enhancing the upside potential on the daily chart. Technical analysis has a fractal nature, and price patterns and signals can often be confirmed by looking at charts on multiple time frames. Kroger’s daily and weekly charts suggest that an impending breakout could be just the beginning of the grocery giant’s next bull market phase. -David Keller, CMT marketmisbehavior.com Disclosure: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliates, and may have been endorsed by CNBC Previously broadcast they appeared on television, radio, online or other media. The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not apply to your particular situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the complete disclaimer.
