Tesco Share Price: Is Tesco in a Price Reversal?

Summary:
• Today’s one per cent gain in the market mars the seventh consecutive trading session that the Tesco share price is on the ascendance.

Today’s one per cent gain in the market mars the seventh consecutive trading session that the Tesco share price is on the ascendance, which has resulted in a 10 per cent price gain. The current bullish push has also pushed the company to recover from the price loss of over 6 per cent, with October gains now standing at almost 4 per cent. 

However, despite the past few trading sessions being aggressively bullish, Tesco’s share price has been in a downward trend throughout the year, which has seen its value drop by almost 30 per cent year-to-date. The current boost has also come despite macroeconomic data going against the company.

This is after the UK reported an inflation rate of over 10 per cent for the first time in 40 years. The high inflation has slowed its consumers’ spending, which has affected clothing and general merchandise. Such a slowdown in sales will likely affect the company’s bottom line for the third quarter. 

The high cost of living has also seen the company struggling with competition from budget chains such as Aldi and Lidl. Therefore, Tesco has had to cede market share to its competitors, which according to data from Kantar, have aggressively expanded in the UK.

Why is the Tesco Share Price Rising?

Despite the negative factors described above, the past few trading sessions have shown strong signs of recovery. One of the main reasons why Tesco’s share price has started to recover in the market is the current political certainty characterized by a new government coming into power.

The move has seen not just Tesco’s share but most FTSE 100 companies starting to recover in the markets. The political environment has also strengthened the British pound, reducing the company’s supplier cost for its imports.

Looking at the chart below, we may continue seeing Tesco’s share price recovering and hitting the 230p price level. For the long term, I expect the share price to hit the 242p price level before the end of next month. A drop below the 210p price level will invalidate my bullish trend analysis.

Tesco Daily Chart