While investors have been infatuated with the latest AI-fueled growth story, I’m actually finding more and more opportunities in defensive areas of the market. These are stocks that have generally underperformed for much of 2024, but recent price and momentum improvements are creating powerful setups with upside potential. Shares of Kroger Co. (KR) are threatening a new 52-week high this week, and a breakout above current levels would confirm one of the most bullish price patterns in the technical toolkit: the cup-with-handle pattern. We can see the cup-with-handle pattern developing on the daily chart, consisting of a six-month rounded bottoming pattern followed by a brief pullback in the month of October. The key to a cup with handle pattern is the “rim” of the cup, which is essentially a trendline connecting the highs during the price pattern. It’s important to note that the cup-with-handle pattern is only validated once the price breaks above this resistance line, as that suggests a new influx of buying power with the potential to push prices even further. That means we would need to see a valid break above $57.50 to complete the bullish signal. Other indicators on the chart seem to suggest that an impending breakout is likely, especially the RSI which has been in a bullish range since July of this year. I’ve also drawn a trendline connecting the major lows since late 2023. As long as KR remains above this key trendline support, I’m inclined to consider this chart to represent a solid bullish trend. Now looking at a weekly chart of Kroger, we can see that the recent price action is actually part of a much larger cup-with-handle pattern that spans back to early 2022. While this is a much longer time frame than normally used for a cup-with-handle pattern, I would say at the very least that the weekly chart shows clear resistance in the $57-59 range. Similar to the daily chart, we can see the weekly RSI has been in a bullish range for the last five years. During a healthy bull market phase, the RSI will often become overbought on rallies and remain above the 40 level on price pullbacks. This continued bullish momentum range suggests a bullish secular trend, reinforcing the upside potential represented on the daily chart. There is a fractal nature to technical analysis, where price patterns and signals can often be corroborated by reviewing charts on multiple time frames. The daily and weekly charts for Kroger suggest an impending breakout that could be just the beginning of the next bull phase for this grocery giant. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
