TRADES CLOSING: Wins of 92% and 33% – and Major Spill In Aisle Four! KROGER Stock Sours (KR, GDX, XPEL)

Before we load up the shopping cart, we’re closing two trades for healthy gains.

The first is our March 31^st GDX trade that arrived in Like a Libyan Dictator! – Gold Prepares to Die.

You’ll recall that there we set the January 21^st 36 synthetic short for a debit of $3.84.

And now.

The short 36 CALL trades for $0.90 and the long 36 PUT goes for $6.00.  Buy back the former and sell off the latter, and you take home $1.26 NET on $3.84 laid out.

And that’s a very fine 33%.

NEXT!

Paint Your Wagon arrived in your inbox on June 14^th and recommended you sell the XPEL October 15^th 80/85 CALL spread for a credit of $2.00 and purchase the XPEL October 15^th 85/70 PUT spread for a debit of $6.10.  Total debit on the trade was $4.10.

As of Friday’s close, the CALL spread can be repurchased for $1.60 (3.30/1.70) and the PUT spread sold for a very hefty $9.50 (16.60/7.10).

Do it, and you leave with a NET total take of $3.80 on $4.10 spent.

Or a very picturesque 92%.

In a mere ten weeks.

APTV – A Second Time

One more trade needs addressing, and that’s our APTV affair, that we wrote about last Friday HERE.

A sleight of hand led us to misread the expiries and offer a “fix” where none was needed.

Not to worry, though, if you did put it on.

It still stands as a likely winner.

We’ll monitor both the original September spread and the newly issued “fix” for you and keep you posted on any action required for either.

A hearty thanks to our ever intrepid, eagle-eyed subscriber Dayle G. for drawing our attention to the error early on.  We were headed into the Holy Sabbath at that very hour and couldn’t do a thing about it.

The G-d of Israel works His will in obscure and meandering ways.

And now to the gutting of the grocery gargantua…

Kroger Co. (NYSE:KR) is the biggest supermarket in the land, and it’s been beating its industry peers in nearly every metric since the Batflu outbreak.

That said, the supermarket industry ranks a solid MEH relative to the rest of the market in terms of relative strength.

So no big deal.

Here are the company’s fundamentals –

• P/E is 24.47,
• Price to Book is 3.82, and
• The Annual Yield is 1.79%.

Nothing too stormy there…

• Until you look at earnings, which fell Quarter over Quarter by a whopping 87.80%, and
• Consensus earnings estimates for the coming year, which foresee a mere 0.07% rise!

With that in your pocket, it’s hard to figure the hype over the last few sessions.

Unless you address…

It so happens that Warren Buffett added to his Kroger stake this last quarter, according to 13-F filings released last Tuesday.

And we believe the latest boost in the stock price is attributable precisely to that release.

Nothing more.

The stock jumped on the news by four and a half percent on the day, and kept rising through Friday’s close for a total gain of eight percent (!) from the date of the release.

Earnings have been solid, sure, but this is not a growth stock, fellow Jews and Noahides.  This is an old-fashioned, steal-from-consumers-in-the-traditional-manner capitalist enterprise.

So the stock got ahead of itself.

As the charts show –

This is the daily for the last six months, and technically it presents –

1. Two overbought RSI signals in the last several days (in green),
2. Along with a MACD indicator that’s in stall position, ready to roll over any day.
3. A 25% rise in price in just six weeks got a Buffett boost in the last three sessions (in black),
4. Leaving a gap that needs filling down to $43.50 (in blue).

Now look at the weekly –

1. Here we have a stock that’s bumping up against the top edge of an eighteen month trend channel (in red),
2. And forming a bearish rising wedge in the process (in blue).
3. This, while WEEKLY RSI strikes overbought (in green), a dire development when taken in conjunction with the daily overbought indicator.
4. The bunched moving averages at 30 (in black) will exert a helio-gravitational pull of orbital intensity on the stock price,
5. Dragging her lower toward one of two, simple Fibonacci retracement levels (in purple) at either 36 (the lower edge of the trend channel) or 31 (the bunched moving averages).

In other words, this sucker’s headed for the check-out.

And we’re playing it with coupons!

Like this –

A Jew and His Money recommends you consider selling the KR October 15^th 45/47 CALL spread* for a credit of $1.07 (3.30/2.23) and buying four (4) KR October 15^th 44/43 PUT spreads** for $0.25 (1.07/0.82) each.  Total credit on the trade is $0.07.

[*Sell the 45 CALL and buy the 47 CALL. **Buy the 44 PUTs and sell the 43PUTs.]

Rationale: With spreads as tight as they are on KR options, we’re afforded a range of good possibilities.

The one we’ve chosen offers us a credit up front,

The chance to make an additional $4.00 profit,

And a maximum downside risk of just $1.93.

Them’s good odds.

If the gap on the daily chart is covered to just 43, we make full profit.

But an 8% decline.

Cake.

With the Al-mighty on our side.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew