NEW YORK (TheStreet) -- Grocery store giant Kroger (KR) has been on a strong momentum run-up since the week of Sept. 14, 2012. Investors will see that this price pattern on its weekly chart shows an inflated parabolic bubble that may be popping since the stock set its all-time intraday high of $77.74 on March 23. The stock has been trading sideways to down since then, making its upcoming earnings report extremely important.
Analysts expect Kroger to earn $1.21 a share before the opening bell on Thursday. On Tuesday, Oppenheimer raised its first-quarter earnings estimate to $1.21 to match the consensus. Oppenheimer maintained an "outperform" rating with a price target on $80.
Whenever a momentum stock is about to report earnings, it's extremely important for investors to consider technical analysis in addition to fundamental analysis. This is what we provide in our must-see charts and key levels at which to buy on weakness and to sell on strength.
Here's the daily chart for Kroger.
Kroger closed at $72.35 on Tuesday, up 12.7% year-to-date, but 6.9% below its all-time intraday high. The stock has been above its 200-day simple moving average since Feb. 20, 2014 when this average was $38.44. The stock is currently on the cusp of its 50-day simple moving average of $72.35, and above its 200-day simple moving average now at $65.25.
Here's the weekly chart for Kroger.
Courtesy of MetaStock Xenith
The weekly chart for Kroger will stay negative if the stock closes this week below its key weekly moving average of $72.42. The momentum reading for the stock is projected to decline to 43.26 this week from a reading of 46.21 on June 12.
Investors looking to buy Kroger should place a good-till-canceled limit order to purchase the stock if it drops to $63.18, which will be a key level on technical charts until the end of June.
Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $83.81, which will be a key level on technical charts until the end of June.
Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past performance, which provides guidance for predicting future share-price direction.
Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.
Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007, and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.
A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.
A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.