SUPERVALU INC. (NYSE:SVU) ended its 13th consecutive down session with a loss of 9.61% and the volume rocketed to 38 million against a daily average of 5 million only. The surge in volume was the highest for a single day in more than 2 years, raising questions if the stock is close to a capitulation bottom.
The reasons for the price capitulating in this violent manner lies in the quarterly results reported by SUPERVALU INC. (NYSE:SVU). The wholesale grocery company actually beat the market expectations of earnings of $0.21 per share as it reported $0.24 per diluted share, a 10.4% increase on a y-o-y basis. Still the stock price was hurt badly as the revenues came at $4.36 billion against the expected $4.39 billion. The low-margin character of the groceries business forces a company to report a solid revenue growth if the margins cannot be improved too substantially.
The strong quarter of SUPERVALU INC. (NYSE:SVU) was led by the 50% profit rise in the company’s Save-A-Lot chain. Same store sales saw an increase of 3.6% and the retail food segment increased by 1.1% over the same period last year.
Technically, the charts look very weak in all time frames. The long term chart attached clearly shows the significance and the strength of area around $12 from the perspective of the longest timeframe. That $12 area supported the stock for over 15 years till it was firmly broken down in 2010. Since then, it has been pushing the price down and considering that the last intermediate rally from the 2012 bottom was divided in clear two equal parts, it is hard to keep bullish views. Still, one must check the price action for the next two sessions as it is testing a long term trendline support around $8.70-90, below which the fall can extend to $8 or even $6 levels in the coming weeks.
