Stock Picks: KMB and KR

The S&P 500 (SPX) has finally managed to breakout of a descending triangle formation and negate the bearish outlook that came with a series of lower highs. In addition, the index appears to have broken out of a small double bottom reversal pattern on the daily chart. The breakout can help propel the index to resistance of 2,800.

With the index showing strength, let’s look at stocks that are flashing bullish signals.

KMB – Kimberly-Clark Corporation

Kimberly-Clark Corporation (KMB) is an American multinational company that is engaged in the production and marketing of personal care products made from natural or synthetic fibers. Incorporated in June 1928, the company has over 42,000 employees working in facilities in 38 countries. Kimberly-Clark’s product portfolio includes brands such as Huggies, Kotex, Kleenex, and GoodNites.

Technical analysis show that KMB appears to be bouncing at the 61.8% Fibonacci level. This comes after the stock printed volume that’s 90% higher than its weekly average. The surge in volume points to the presence of bulls at this price level.

In addition, the last two candlesticks on the weekly chart are hammers. The long wick below the candle’s body suggests that there are buyers below 104. Lastly, a bullish divergence can be seen on the weekly chart. This is a strong hint that a reversal is in sight.

Also, fundamental analysis reveal that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of KMB is 20.61. The stock may fairly priced based on the PE ratio, but it has a five-year maximum of 79.47. This suggests that investors are willing to pay a premium for KMB shares.

The strategy is to buy at current market price. As long as the stock stays above 100, it has the momentum it needs to rally to our target of 118.50. The process may take less than three months.

Weekly KMB Chart

Monthly KMB Chart

As of this writing, the Kimberly-Clark Corporation stock is trading at 104.90.

Summary of Strategy

Buy: Buy at current market level of 104.90.

Target: 118.50

Stop: Close below 100.

KR – The Kroger Company

The Kroger Company (KR) is an American retail company that operates supermarkets, department stores, jewelry stores, and convenience stores across the company. Incorporated in April 1902, Kroger has grown to become the third largest private employer in the United States with over 443,000 employees to help the company generate a net income of $1.907 billion in 2017.

Technical analysis show that KR has established a bullish higher low setup of 22.85 in March 2018. The move came after the stock generated volume that’s 124% higher than its weekly average. Since then, volume has been declining, which suggests that participants are losing interest to sell at this price level. In addition, KR appears to be respecting the 38.2% Fibonacci level.

Furthermore, fundamental analysis reveal that KR’s trailing twelve months (TTM) PE ratio stands at 11.89. The stock still looks attractive. It appears to have upside potential based on its PE ratio.

The strategy is to buy as close to 24 as possible. As long as the stock stays above 23, it may have the strength to rally to our target of 30.

The process may take less than three months.

Weekly KR Chart

Monthly KR Chart

As of this writing, The Kroger Company stock is trading at 24.57.

Summary of Strategy

Buy: Buy as close to 24 as possible.

Target: 30

Stop: 23

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.