The stock has enjoyed a few meme-stock inspired rallies so far this year, but has not been exploding higher over the last month like AMC Entertainment (AMC) - Get Report, BlackBerry (BB) - Get Report and others.
Rite Aid did enjoy a mild rally in June, but shares pulled back ahead of earnings and are now moving lower.
The company’s report included a disappointing full-year forecast, which clearly has been weighing on the stock on Thursday.
In April, Rite Aid also reported disappointing earnings, which knocked the stock lower. However, just like it is now, a key support measure is buoying Rite Aid. Let’s take a closer look at the chart.
Trading Rite Aid
For months, the $16.50 to $17.50 range has been support for Rite Aid stock. It was support in April on disappointing earnings and it was solid support in early May when SPACs, meme stocks and growth companies were getting crushed in a painful bear market.
Now, this area is again serving as support. On top of that, the 200-day moving average continues to act as support. Rite Aid has a solid base and support zone right near current levels.
On the one hand, this give dip-buyers a reasonable risk-reward setup.
Should support hold, they can look for a bounce. On the upside, that includes a rally up to the 50-day moving average, then the gap-fill level at $19.65. Above that puts $20-plus and the 21-week moving average on the table, before we turn our attention to a potential run at the June high.
But let’s not get ahead of ourselves: First, support has to hold.
For conservative investors, that means continuously closing above the 200-day moving average. For more aggressive investors, their standards will be more loose, likely sticking with Rite Aid so long as it’s above the May low at $16.63.
A close below $16.63 and we have some problems.
Not only does that put Rite Aid stock below a key support zone and the 200-day moving average, but it would give us a monthly-down rotation.
That would likely open up the 2021 low at $15.35 and potentially lower depending on how strong the selling pressure is.
Let’s keep an eye on the 200-day moving average. Above Thursday’s high and we can start looking for a larger bounce.