There are several critical aspects of the PreMarket Prep show that no other financial media has even a clue about. One of those is interpreting order flow and the price action in premarket and after-hours trading.
There was an excellent example of this unique content during Friday's show regarding the premarket price action for Kroger Co KR. As a result, it is the PreMarket Prep Stock of the Day.
Kroger Shows Resistance Ahead Of Q2 Report: Over the last month, there has been a seller or group of sellers in the $50 area. This was evidenced by three consecutive highs in that area in mid-August ($50.18-$50.34).
In addition, Kroger peaked at $50.14 early in Thursday's session and weakened to end the session at $48.36 (closer to the low) for a net change of a decline of $1.46 or 2.9%.
This was contrary to the S&P 500 cash index, which had a gain of 0.07% and closed near the high for the session.
Kroger's Q2 Report: Before the opening Friday, the grocer reported quarterly earnings of 90 cents per share, which beat the analyst consensus estimate of 77 cents by 16.88%.
The company reported quarterly sales of $34.6 billion, which beat the analyst consensus estimate of $34.25 billion by 1.02%.
The company also raised its FY22 outlook off the second-quarter beat and planned a $1-billion stock buyback plan.
PreMarket Prep Spots Huge Seller: Active traders have to keep in mind that in premarket or after-hours trading, rarely do the buyers or sellers show their whole hand.
Many use "iceberg orders" that reveal only small (100 shares) amounts, but their intentions to buy or sell may be much bigger.
When the stock was mentioned on the show Friday, it had already spiked to $51.30 and was trading actively at the $50 area. Co-host Dennis Dick immediately identified an extremely large sell order of 62,000 shares at $50.
"That is a huge order on ARCA, considering that only 60,000 shares have traded so far in the premarket," Dick said. "That order aligns with the daily charts as potential resistance, so if it can clear that, it opens up."
The author of this article alerted traders going into the lift after that large offer that more sellers could be at the $50.25 area.
It was also discussed how traders should approach an order like that if confronted with one in the regular session.
KR Price Action: The traders who took out that order in the premarket had a few minutes to exit at a higher price, as there was a brief rally to $50.25. More and more sellers then came in and knocked the issue well under $50.
In fact, the issue traded to $48.56 in the first 5 minutes of the session and sharply reversed course.
The stock was trading 7.16% higher at $51.79 heading into the close Friday.
The discussion about Kroger from Friday's show can be found here:
Photo: II.studio via Shutterstock.
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