How to trade Sainsbury’s Q3 trading statement

With Sainsbury’s Q3 trading statement to be released on Wednesday, market participants will be wondering whether the second largest UK supermarket chain will be able to retain its September 14.6% market share of UK supermarket sales and its margins.

The first of the big four to report after what seemed to be a solid Christmas, possibly boosted by the world cup, it will be interesting to see how Sainsbury’s costly (£550m over two years) price-matching regime has positioned the grocer compared to fast-growing discounters Aldi and Lidl, with the latter attracting 1.3 million new customers over the Christmas period.

The third quarter trading statement will provide clues on whether demand, especially for groceries in the run up to Christmas, held up amid the cost-of-living crisis and whether Sainsbury managed to maintain its margins.

Analyst recommendations

Refinitiv data shows a consensus analyst rating of ‘hold’ for Sainsbury – 1 strong buy, 1 buy, 7 hold and 4 sell - with the median of estimates suggesting a long-term price target of 228 pence for the share, around 8% lower than the current price (as of 9 January 2023).

IG sentiment data shows that 77% of clients with open positions on the share (as of 9 January 2023) expect the price to rise over the near term, while 23% of these clients expect the price to fall whereas trading activity this week showed 80% of buys and this month 56% of buys.

Sainsbury – technical view

Since October the Sainsbury share price has risen by nearly 50%, 10% year-to-date, and is fast approaching the 50% retracement of its August 2021 to October 2022 decline at 255.4 pence.

The share price is boosted by general risk-on sentiment as China re-opens and investors’ hope that the US Federal Reserve (Fed) may reach a pivot with regards to its monetary policy later this year.

The share price it thus trading back at levels last seen in April 2022, close to its 252.1p June 2021 low.

Given the strong upside momentum and 10% advance which has been seen in the Sainsbury share price since the beginning of this year, the odds favour further upside with the September-to-December 2021 lows from 268.8p to 282.1p representing a technical target zone for the weeks and months ahead, some 10% to 15% higher than current levels (as of 9 January 2023).

Slips should find support around the 238.4p November high.

From a technical perspective the share price will remain medium-term bullish while it stays above its 220p December trough.