Ocado Share price surges 12% in a week: Is it too late to buy?

Summary:

Despite being labelled "excessively high", the Ocado share price has made a stunning recovery, gaining for five straight days.

Despite being labelled “excessively high”, the Ocado share price has made a stunning recovery, gaining for five straight days. Furthermore, If OCDO finishes higher today, it will mark its longest winning streak since September 2020. Surprisingly, this comes less than two weeks after analysts at investment bank Barclays warned buyers to stay away from Ocado.

Earlier this month, Barclays cut their 12-month price target for Ocado Group Plc (LSE: OCDO) to 1,575p from 1,600p and predicting the shares could fall a further 10%. This dealt another blow to the struggling grocery delivery firm, which earlier this year was trading at 2,886p.

Unlike many, Ocado had been a huge beneficiary of the Covid-19 pandemic, and its delivery solutions saw a surge in interest as shoppers were forced to desert the high street. However, following the easing of lockdowns in the UK, shopping habits are returning pre covid norms. As a result, by the 19th of July, OCDO had dropped more than 40% from its 2021 high and showed a negative return of 25% year-to-date. However, the share price has increased over 13% since then and is now on the verge of breaking out on the upside.

OCDO Price Forecast

The daily chart shows the price action has resulted in three clearly defined trend lines. The first, which should be considered major support, is visible below the price at 1,680p. This has been in place since September 2020 and was the catalyst for the bounce in July.

Last week, the share price confidently cleared the second important trend line at 1,820p. The trend from the March high was a significant resistance level, and therefore now becomes support.

Lastly, the share price is currently jostling with a short-term, descending trend at 1,955p. The 100-day moving average at 1959.9p further reinforces this resistance. However, if OCDO climbs above 1,960, it may extend higher to the 200-day average at 2,038.40p. Therefore, this could prove pivotal for the recent turnaround.

For now, the Ocado share price is still in a downtrend, and a failure to clear 1,960p could result in a reversal. Although above 1,960p, the technical picture brightens considerably.