The Burberry share price has suffered a chequered 2021. After gaining 25% in the first six months, BRBY slumped more than 20%. But in the last two day’s the fashion house has shown signs of life, gaining 4%. However, it remains to be seen if this is the start of a reversal or merely a pause ahead of a much larger decline.
FTSE-listed clothing retailer Burberry Group Plc (LSE: BRBY) has recently fallen out of favour with investors. The start of the rout was due to the departure of CEO Mario Gobetti to rival Salvatore Ferragamo in June. This led to a sell-off that wiped more than 15% from BRBY, sliding the share price from 2,267p to 1,919.5p. However, BRBY clawed back most of the losses in the three following weeks and looked set to make a fresh assault at Junes’ high. However, troubles in China, the firm’s largest market, forced the share price to back on the retreat.
Whilst a growing number of Covid-19 cases in China started to exert price pressure on the shares, this was compounded by calls for the government to redistribute the riches of its wealthiest citizens. And if the government pushes forward with plans to regulate high-income earners, it could remove much of the vital disposable income spent in Burberry’s luxury stores. Although this is yet to materialise, it casts a shadow over the already struggling Burberry share price.
Focussing on the daily chart, we see that BRBY has found some support at 1,800p. The price bounced from just above the figure on Friday and again on Monday. Therefore 1,800p should be viewed as the first level of interest. Another supporting factor is the relative Strength Indicator (RSI), which is turning higher from oversold conditions.
However, the price remains below the 200-day moving average at 1,959.8p. And considering the sell-off accelerated once this threshold was breached, the outlook remains negative until it is recovered. Therefore, until BRBY climbs above 1,960p, it will remain vulnerable to a retest of support. In that event, should 1,800p fall, January’s 1,673.5p low becomes a real possibility.
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