The Ocado share price has been in a strong bullish trend in the past few days even after the company slashed its growth forecast. OCDO is trading at 901p, which is almost 30% above the lowest level this month. It has also moved above the lower side of the descending channel, which is a sign that it could be bottoming.
Ocado Group is having a difficult period as demand for its e-commerce solutions eases since more people are now shopping in stores. The company is also struggling as the cost of doing business rises. In a statement last week, Ocado Retail slashed its growth outlook as conditions worsened. It now expects that its sales this year will grow by low single digits instead of the 10% it guided before.
The firm said: “Ocado Retail is seeing consumers ordering one or two fewer items per shop than before and therefore the value of the average basket is currently trending 9% lower compared to a year ago.”
Therefore, the fact that Ocado’s retail business is expected to grow by less than 5% this year means that the company is no longer a growth stock. Meanwhile, the company announced that it was acquiring Myrmex for 10 million euros as it seeks to accelerate its Ocado Smart Platform. The acquisition comes about 2 years after Ocado bought a minority stake in the company.
This is a relatively small acquisition for Ocado, a company that is valued at over 7 billion pounds. The concern is whether it makes sense to spend money on acquisitions when its stock has fallen by almost 70% from its all-time high. The firm has also continued to ramp up its losses.
Turning to the daily chart, we see that the Ocado stock price has been in a freefall in the past few months. This drop brought it to a low of 699p this month. Now, it has rebounded and moved slightly above the lower side of the descending channel. At the same time, the shares are between the 50-day and 25-day moving averages.
Notably, the stock has formed a beak and retest pattern, by moving slightly above the descending channel. Therefore, the Ocado share price will likely resume the downward trend in the coming weeks and possibly test the support at 500p. A move above the resistance at 945p will invalidate the bearish view.
This post was last modified on May 30, 2022, 06:22 BST 06:22