Surefire Bull Signal Flashing for Kroger Stock

The security just came within one standard deviation of its historically bullish 80-day moving average

Grocery store name Kroger Co (NYSE:KR) has been one of the steadier climbers on the charts of late, up 34.2% in the last year, and well on its way to notching its fourth consecutive monthly win. While the security has pulled back since its March 18, three-year high of $36.84, the shares found some cushion at their 40-day moving average. Another area of technical support could come into play, as well, according to a study from Schaeffer's Senior Quantitative Analyst Rocky White, which could help propel the security higher.

Specifically, KR just came back within one standard deviation of its 80-day moving average after a lengthy period above the trendline. Per White's data, this signal has flashed four other times in the past three years, and was higher one month later each time, averaging a 21-day return of 6.88%. From its current perch at $32.37, a similar move would put KR right back below the $35 level, which is home to its mid-May, two-month highs.

Kroger is ripe for analyst upgrades and/or price target hikes, too. Of the 16 covering the security, just six call it a "strong buy," compared to 10 saying "hold" or worse. Plus, the consensus 12-month price target of $34.72 is just a slim 7.5% premium to current levels.

An unwinding of short interest could also push the equity higher. In the last two reporting periods, short interest shot up an alarming 98.4%. The 53.6 million shares sold short now represent 6.8% of KR's available float, and would take almost a week to cover at the stock's average daily pace of trading.

The options pits have been echoing this bearish sentiment. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), KR sports a 10-day call/put volume ratio of 0.8, which sits higher than 86% of all other readings from the last year. This implies that while calls are still outnumbering puts overall, the appetite for these bearish bets has rarely been healthier.

That being said, now looks like an attractive time to speculate on KR's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 41% sits in the bottom quartile of its annual range. This means the options market is pricing in relatively low volatility expectations at the moment.