Diageo Share Price Consolidates Around £27.38 Support

Summary:

Diageo share price is looking very bearish. So far, LON: DGE is consolidating after finding support around £27.38 level.

Diageo (LON: DGE) share price is struggling to find any strength despite a 23% drop this year. The shares of the British multinational alcoholic beverages conglomerate are currently consolidating around a very critical support level which needs to be defended to avoid another bearish leg.

On Wednesday, the sentiment of the UK stock markets once again remained mixed. The benchmark FTSE 100 index was up 22 points till press time but Diageo shares didn’t show any significant gain or loss for the day. At press time, the stock stood at £28.10 after a 0.67% drop this week.

The market participants are awaiting the Western central banks to announce the changes in their monetary policy as they meet this week. The most important will be the FOMC meeting in the US which is scheduled for today.

Due to weakening fundamentals, Diageo’s stock is getting downgraded from multiple investment giants. Just recently, UBS has lowered its rating to ‘sell’ from ‘neutral’ while decreasing its price target to £26.50 from £36.50.

However, while the near-term outlook for the European beverage industry looks negative, UBS analysts still expect a rebound in Q2 2024.

Let’s have a look at the weekly chart of LON: DGE. At the moment, the price has found some support around the high timeframe support of £27.38. A breakdown below this support level might put a retest of the £25 level on the cards.

However, there is a strong likelihood of a relief bounce from the current levels as the price has left a gap above £29.98. Therefore, I expect a retest of this level before bearish continuation. The RSI and MFI indicators are still not quite oversold and suggest that more downside is likely in the coming weeks.