Ocado’s share price has taken a beating this Wednesday, after the company’s lacklustre earnings report was released to the market.
The consumer shopping shift which occurred when the coronavirus pandemic hit allowed the company to pull in record sales of more than £2billion for the first time ever, but this did not translate into a positive balance sheet as the company posted a loss before tax of £44million.
Consequently, Ocado took a hit on the FTSE 100 today, losing 3.37% as at the time of writing to trade at 2606.
However, this dip in the share price of Ocado may be temporary, as a look at the financials indicate that the company’s losses were due to entirely different reasons. The company has invested heavily in technology improvement, and its losses were actually lower than in 2019, when it lost £214.5million. Furthermore, the online shopping habits of consumers appear to be the new normal. With demand at record levels, Ocado share price may return to winning ways soon.
The double top of January 2021 set the tone for the selloff from a high of 2884 on 4 February to present levels. Today’s intraday low completes the measured move from the double top confirmation, which occurred after the break of the neckline at 2741.
A bounce at the 2606 support (38.2% Fibonacci retracement level) allows for a resumption of the recovery move. This move needs to break above the barriers posed by the 2741, 2818 and 2902 levels to form a new high that signals resumption of the uptrend.
On the flip side, a breakdown of the support zone that lies between 2606 and 2582 allows for price to dip towards 2513 (50% retracement level), with 2440 and 2360 serving as additional targets to the south.