Tesco Revisited

Tesco’s Q115 results were released this morning, which in the main were far better than most analysts’ forecast. This should be of no surprise as the majority of analysts and economists tend to “herd” in respect of “looking through the rear view mirror” and of “extrapolating” forward the most recent past.

A Socionomist, however, will study the share price pattern and from it anticipate the ebbs and flows of positive and negative social mood, which will assist in predicting a share price trend.

It was in September 2014 that Tesco PLC, a major retail giant of the UK’s blue-chip FTSE 100 index, announced it had overstated its half-year profits by £250m and saw its share price collapse by 12%. Our blog post,  “Ever Little Helps, but £250m,” analysed the share price from a technical view, concluding that “an opportunity appears to be shaping up for a decent bounce in its share-price, perhaps back towards the 265 to 300 pence range.

A caveat was added, however, that I would prefer to await a change in the panel indicator to green, or at least to neutral before buying.

So how has it panned out?

26 June 15 Blog 1.

As can be seen from the chart above, it’s been pretty much as forecast:

The indicator panel changed to Neutral a month or so after the post, turning to Buy towards the year-end, since when the share price rallied to 254p in early April of this year, despite the ongoing concerns about the management’s ability to turn-around this juggernaut of the retail sector.

So where do we go from here?

Predictably, the analysts’ will be falling over themselves to extrapolate forward a higher share price and they may be correct, not because of the better news released with today’s results, but more to do with a re-test of the 50% Fibonacci retracement level shown on the monthly data chart below, which is at 250p. It may even recover to the 61.8% retracement target at 273p per share.

26 June 15 Blog 2.

However, the longer term monthly chart appears to be a massive “head and shoulder” pattern, which has ominous considerations, which will target my longer term target set out in last September’s post.

It is worth a re-read.

 

 

 

 

 

 

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