Tesco’s share price fell in recent weeks, as the rally that took place recently paused. The share price has fallen from 445p, the highest level ever reached on 8 September to 433p. The current price is 43% higher than the low point of this year. The article explains why TSCO may fall after it forms a bearish pattern.
Retail sales in the UK are steady
Tesco’s stock rose a little on Friday, after the Office of National Statistics published its latest retail sales figures.
The report shows that retail sales in the country rose slightly even though inflationary pressures continued.
In August, the headline retail sales increased by 0.5% compared to July. The increase in August was similar to the July growth and higher than the median estimate (0.3%). This translated into an increase of 0,7% annually, which is also higher than expected growth of only 0.6%.
This report showed retail sales, excluding fuels, rose 1.2% YoY. That was also above the median sector figure of 1%.
This means that spending was good in August despite the high inflation rate. According to a report published on Wednesday, both the headline inflation and the core inflation figures were above 3.6% in August of this year.
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Tesco gains from increased retail sales
Tesco is a big retailer and benefits from high sales. Higher volumes are an indicator that customers shop more in Tesco stores.
Tesco has been doing very well in recent months, despite the UK’s economy still being stuck in a stagflation period, characterized by high prices and low economic growth.
The company stated in a statement that the group’s sales increased by 4.6% to more than PS16.38billion during the second quarter. This growth was mainly driven by the UK division, which saw sales rise 5.1% in Q2 to more than PS12.3 billion.
Booker, Central Europe and the Republic of Ireland also saw good growth in revenue during this quarter.
The company was able to resist the price-cutting pressure of Asda. Tesco is able to benefit from the large number of retail outlets in the UK and its price matching policy, which ensures that the products it sells are fairly priced.
In the UK, the brand’s perception jumped 65 basis points. The market share also jumped 44 basis points from 28% to 28. The company had 24 four-week streaks of gains in share.
Tesco Share Price Technical Analysis
TSCO’s stock has been retreated in recent days, according to the daily chart. The TSCO stock price has pulled back in the past few days after forming a double top pattern.
Double-tops are one of the more popular patterns for bearish reversals in technical analysis. Both the MACD and Relative strength index have shown bearish patterns.
The stock is likely to pullback, possibly up to the moving average of 50 days at 417p, and resume its upward trend. The stock will confirm further gains only if it rises over the double-top at 445p. If the stock rises above this level, it will indicate further gains up to 500p
The post Tesco shares bearish divergence indicates a pullback. This may change as new updates are released.
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