One under-$10 stock in the grocery store complex that's trading very close to triggering a near-term breakout trade is
(SVU), which, together with its subsidiaries, operates retail and wholesale food stores in the U.S. This stock has been crushed by the sellers so far in 2012, with shares down by a whopping 70%.
Shares of SVU are spiking notably higher today by 7% to $2.20 after the company said its review of strategic alternatives is proceeding and that it is in talks with several parties.
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If you take a look at the chart for Supervalu, you'll notice that this stock recently failed at its 50-day moving average and then went on to print a new low of $1.80 a share. Following that low, shares of SVU have started to rebound with heavier volume as it now approaches its 50-day again at $2.28 a share. That bounce is quickly pushing SVU within range of triggering a near-term breakout trade that could push the stock back into a previous gap down zone.
Traders should now look for long-biased trades in SVU once it manages to break out above some near-term overhead resistance at $2.28 to $2.62 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 5.1 million shares. If that breakout triggers soon, then SVU will have a great chance of re-testing or possibly taking out its gap down day high from July near $3.50 a share. Any high-volume move above $3.50 will then give SVU a chance to fill some of its gap that started at around $5.30 a share.
Traders can look to buy SVU off weakness long as its trending within range of its 50-day at $2.28 a share with strong upside volume flows. I would add to any long positions once SVU clears $2.58 to $2.62 a share with volume, and then add again above $3.50 a share. I would use a stop that sits just below today's low of $2.09 a share.
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