- Summary:
- Tesco share price is struggling today as Brexit talks drag on. While analysts believe that the shares can bounce back to 283, a technical analysis hints at more downside.
Tesco share price is down by more than 0.75% today as jitters about a no-deal Brexit sends shockwaves in London. The shares are trading at 225p, which is substantially below last month’s high of 236p. Other retailers are also struggling, with Sainsbury shares dropping by more than 1.50%. Ocado has fallen by 0.40% while Morrison shares are still unchanged.
A lot has happened in the past few days. During the weekend, Germany and France managed to lower their requests about fisheries. At the same time, talks between the two sides restarted as they attempted to address key issues.
Today, Tesco, sterling, and the overall FTSE 100 index are falling in reaction to a report by the Sun. Citing sources, the paper said that Boris Johnson was getting frustrated with the talks and that he was prepared to give up within hours. He cited the EU’s reluctance on compromise against key demands.
Tesco share price would be affected if the country fails to reach an agreement with the European Union. For one, analysts and the UK government have warned that the economy would be significantly affected if there’s no deal.
Also, supply chains between the two sides would be affected without a deal. Worse, such a situation would happen at a time when the unemployment rate is rising and the UK public debt has ballooned to record highs.
Notably, Tesco is basically a domestic retailer after it exited its loss-making European business early this year. As such, in case of a no-deal Brexit, the company would not have external revenue to offset this decline.
Analysts estimates on Tesco shares
Meanwhile, analysts are still optimistic about TSCO share price. Data compiled by MarketBeat shows that the average analysts target of the stock is 283p, which is 25% from the current price. Analysts from companies like Morgan Stanley, Jefferies, Shore Capital, UBS, and Citi, are all optimistic about the shares as shown below.
Tesco share price technical outlook
On the daily chart, we see that Tesco shares reached a high of 236p on November 19 and formed a bearish engulfing pattern. The price is also slightly above the 50-day and 100-day simple moving averages. Most importantly, it seems to be forming a bearish consolidation pattern that is shown in blue.
Therefore, in the near term, I predict that the price will continue moving lower as bears attempt to move back to the descending pink channel. However, a close above last month’s high of 236p will invalidate the bearish thesis.
Tesco shares technical chart
