The Ocado Share price has surged 16% over the last week as the odds of a UK wide lockdown and a return to WFH increase. On Tuesday, Ocado (LON: OCDO) stretched to a six-day winning streak, closing 6.5p higher at 1,802p (+0.26%). The bounce from last week’s 18-month low of 1,545.5p has reduced the year-to-date loss to around 20%.
Ocado’s poor performance this year is due to a normalisation of the British economy and retail shopping habits. However, a recent surge in Covid-19 cases in Britain has prompted calls to reintroduce restrictions. Yesterday, the UK recorded its highest daily death toll in 7 months, a worrying 15% rise on the previous week. The head of the National Health Service has wanted that unless the country implements a ‘Plan B’ including a mask mandate and Work from Home (WFH) options, the health could spiral into a crisis. Although a return to restrictions as we head into the busiest shopping period in the year would be disastrous for many retailers, it may provide a welcome boost for the Ocado share price.
The daily chart shows OCDO has been trending lower for the last 12 months. Notably, the series of lower lows has created significant trend support below the market, which provided a technical catalyst for the recent bounce. Interestingly, the 50-day moving average at 1,818.8p halted yesterday’s advance and remains the first significant resistance level. Above the 50 DMA, the 100 at 1,854p comes next, followed by trend line resistance at 1,913p. Furthermore, successful clearance of the trend could catapult the Ocado share price towards the 200-day moving average at 2,062p.
Although the technical backdrop is improving, the share price remains downtrend and faces stiff overhead resistance. Not forgetting the basis of a bullish outlook is dependent on a worsening of the UK’s covid situation. Therefore, investors should pay close attention to how the current outbreak develops. That being said, I expect Ocado to test trend resistance and possibly breakout towards the 200 DMA in the days ahead. However, if OCDO reverses below 1,724p, it invalidates this bullish call.
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This post was last modified on Oct 20, 2021, 07:32 BST 07:32