Sainsbury Share Price Outlook After the 31% Comeback

Summary:
• Sainsbury share price has done well since October as demand for the stock remain at an elevated level. What next for SBRY?

Sainsbury share price has done well since October as demand for the stock remain at an elevated level. The shares jumped to a high of 227p on Thursday, which was the highest level since June. It has risen by more than 31% from its lowest level this year, outperforming its peers like Tesco and Marks and Spencer.

Sainsbury’s recovery gains steam

Sainsbury’s is a leading British retailer that operates more than 1,400 stores in the UK. It is the second-biggest retailer after Tesco in terms of market share. Recent data shows that it controls a market share of 15.5% compared to Tesco’s 27%. All these large retailers have co-existed well although they face significant competition from the likes of Aldi and Lidl.

Sainsbury share price has rallied since the firm published the latest financial results last month. Its grocery sales rose by 0.2% in the first half of the financial year, with the second quarter rising by 3.8%. General merchandise sales dropped by 6.1% while group sales rose by 4.4%, helped by fuel sales. 

Further data showed that operating profit declined by 9% while underlying profit before tax came in at £376 million. It left its guidance unchanged, meaning that its underlying profit before tax will be between £630 million and £690 million.

Sainsbury’s faces major challenges and opportunities in the coming months. UK retail sales have dropped sharply as inflation has remained at an elevated level. At the same time, there are positive signs that the supply chain challenges that existed a few years ago have started fading.

Sainsbury’s share price forecast

The daily chart shows that the SBRY share price has been in a steady bullish trend in the past few weeks. This recovery saw the shares jump to a high of 227.2p, which was the highest level in months. It has found a strong resistance at 225p. 

The stock is being supported by the 25-day and 50-day moving averages while the Money Flow Index (MFI) has tilted downwards. Therefore, the outlook for the shares is bullish as long as it remains above the moving averages. If this happens, the key resistance level to watch will be at 250p.