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Tesco shares may resume their ascent post FY results

Tesco’s share price has been subdued since its 304 pence late January high but may be rejuvenated by the company’s full-year earnings which are expected to see profits soar to £2.75 billion.

Tesco's share price

​Tesco’s share price, which started the year well by trading at 11-year highs around minor psychological resistance at 300, continues to look subdued around the 270 pence level despite the supermarket giant’s profits expected to soar to £2.75 billion when it announces its full-year (FY) results on Wednesday.

The war in Ukraine, soaring UK inflation, which may near the 10% mark by the end of the year, and the cost of living crisis, have been reasons why the share price has come off from its late January 304p multi-year high and why city investors are keen to hear how Tesco intends to support shoppers.

Analysts expect the grocery giant to maintain momentum after a busy and profitable Christmas meant it increased its market share which currently stands at around 27 per cent, ensuring it continues to dominate rivals such as Asda, Morrisons and Sainsbury’s which have all seen their share decline.

Ahead of tomorrow’s FY results, Tesco’s share price remains above its 200-day simple moving average (SMA) at 268p, just as it did at the beginning of March when it made its year-to-date low at 265p.

The bull run

For the bulls to be back in control, a rise and daily chart close not only above the two-month downtrend line at 280p would need to be seen, but, more importantly, above the late March high and 55-day SMA at 284p.

This would need to be on a daily chart closing basis, meaning only a daily share price close above 284p would trigger the next up leg. If this were to occur, this year’s highs around the psychological 300p mark could be back in the frame.

Were the 200-day SMA and the March low at 268p to 264p to give way, however, the September 2021 high at 261p would almost certainly also be slipped through with the early September high at 256p being in focus, together with minor psychological support around the 250p mark. Further down lies good support between the September and October lows at 246p to 244p.

However, these levels have to be seen in the context of Tesco’s bull run, which began in October 2020 around the 157p level. It shows that the primary trend is clearly still up for Tesco shares and that the current secondary correction against this trend has so far only lasted for a couple of months which is nothing unusual and, to the contrary, is to be expected, even without a war going on in eastern Europe.

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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