Can Rite Aid Stock Hit $10 by Year End?
NEW YORK (TheStreet) —
Rite Aid (RAD – Get Report) stock has been a popular choice among investors who focus on stocks trading below $10 a share (though many equity portfolio managers can only invest in stocks that trade above $10 a share). If the drug store stock beats earnings expectations on Thursday, it could be heading for that $10 mark. Here’s how to trade it.
Rite Aid shares had a positive reaction to earnings back on Dec. 18 and gapped above their 200-day simple moving average. This was followed by a “golden cross” on Jan. 28, which provided the momentum to lift the stock to a multiyear high on Aug. 5. A “golden cross” occurs when the 50-day simple moving average trends above the 200-day simple moving average, and indicates that higher prices lie ahead.
Analysts expect Rite Aid to earn 3 cents a share when it reports results before the opening bell on Thursday. Odds favor an earnings beat as the company focuses on expansion of its pharmacy and health care clinical services.
Here’s the daily chart for Rite Aid.
Courtesy of MetaStock Xenith
The daily chart shows that Rite Aid popped above its 200-day simple moving average in green on Dec. 18, following a positive earnings reaction released that morning. This set the stage for solid gains in 2015. The stock had a “golden cross” on Jan. 27, which is still in play today, with the 50-day simple moving average in blue at $8.62 above the 200-day simple moving average of $8.02. An issue is that the stock needs a positive reaction to earnings to pop above the 50-day.
Rite Aid had a setback on “Black Monday.” The stock closed at $7.94 on Aug. 21 and gapped lower by 8.3% on Aug. 24, falling to a low of $6.97 a flash crash of 12.2%. The stock was below its 200-day simple moving average for just that one day.
Rite Aid had a close of $8.54 on Tuesday, up 13.6% year to date and up 26.4% from the flash crash low. From its high of $9.47 set on Aug. 5, the stock is down 9.8%, just shy of correction territory.
Here’s the weekly chart for Rite Aid.
Courtesy of MetaStock Xenith
The weekly chart for Rite Aid stays positive if the stock closes Friday above its key weekly moving average shown in red at $8.51. The weekly momentum is projected to rise to 53.40 this week, up from 50.51 on Sept.11. Momentum scales from 00.00 to 100.00, with a reading below 20.00 oversold and a reading above 80.00 overbought. This study is shown in red along the bottom of the chart.
The 200-week simple moving average in green is at $4.46, representing the longer-term reversion to the mean. Rite Aid has been above its 200-week since the week of Dec. 28, 2012, when the average was $1.20, making this stock an excellent choice as an “option on survival.”
Investors looking to buy Rite Aid should place a good till canceled limit order to purchase the stock if it drops to $8.30 and $8.24, which are key levels on technical charts until the end of 2015 and the end of this week, respectively.
Investors looking to reduce holdings should place a good till canceled limit order to sell the stock if it rises to $10.70, which is a key level on technical charts until the end of September.