The Ocado share price has continued its descent after partner Marks and Spencers reported a huge operating loss and future store closures.
Earlier in the week, my colleague braced OCDO investors ahead of the Marks and Spencers earnings.
Sadly for the longs, he was right to be worried.
Ocado had been a long-term trading partner of Waitrose. However, this relationship came to an end in late 2020. Waitrose joined forces with Deliveroo, and Ocado struck an alliance with M&S.
Therefore, the Ocado share price pays close attention to the fortunes of its biggest trading partner.
Last week’s M&S earnings showed the high street giant had reported a full-year loss of £201 million. The retailer also revealed plans to shrink its footprint, closing 70 stores over the next 10 years.
OCDO lost over -4% and finished the week at 1,889.0p.
Ocado has been a beneficiary of the U.K’s covid lockdowns. Food delivery services saw a huge rise in business during the darkest days of the pandemic. This helped the Ocado share price achieve its all-time high of 2,914.0p in September 2020.
The gradual re-opening of the U.K economy is now starting to weigh on OCDO. After spending more than a year under restrictions consumers will be keen to return to their old habits.
The weekly chart clearly shows a double top pattern, linking September’s high with a second peak in February.
The reversal of this second rally created a bearish formation. The price is now -35% lower from this peak and potentially may go lower still.
We can also see a wide horizontal area of support between 1,860p and 2,030.0p. A close below this channel would no doubt trigger more losses.
On a long-term basis, the price may find some initial support at the March 1,559.0p high. However, the real danger is a steeper decline to June 2019, high at 1,420.0p.
A close above 2,030.0p sets the Ocado share price up for a rally to the April high at 2255.0p, canceling the negative outlook.
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