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This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.

Buy – Tesco - 18 June 2018

Trade Parameters

  • Opening Price: 256p
  • Stop Loss: 240p (16p/6.3% below)
  • Profit Limit: 300p (44p/17.2% above)
  • Reward vs Risk: 2.8x
  • CFD Margin: 3%

Observations – For

  • Bullish breakout; highest since Aug 2014
  • Directional indicators diverging bullishly
  • RSI rising lows support since November
  • Bullish trend on Point & Figure chart
  • Momentum bounced off rising support

Observations – Against

  • RSI overbought
  • No moving average support before stop loss
  • No bullish cross on Directional Indicators
  • 50-day moving average support below recent lows
  • Stochastics close to testing MACD for support

Analyst Comments

Strong share price breakout to multi-year highs after stronger than expected trading update showing benefit of acquiring wholesaler Booker. Potential for rally back towards 10.5yr falling highs resistance around 300p.

Note that if Kantar monthly grocery market share updates suggest Tesco losing market share to rivals, the shares could pull back. UK monthly retail sales data could dent sentiment as could rising expectations of an imminent Bank of England interest rate rise which might hurt consumer confidence by increasing borrowing costs.

Consensus is bullish with 54% of brokers suggesting Buy and only 18% saying Sell. The share price breakout could encourage some of the 27% of Neutrals to upgrade, which could help the shares. We note that since last week’s trading update several brokers have upgraded their targets to 275/290/300p, with 59% of them suggesting upside from current levels. The skew between the highest and lowest target is +17%/-34%.

Next Event: Interim results, 3 Oct

Latest Broker 12-Month Consensus: 55% Buy, 27% Hold, 18% Sell (full breakdown on request)

Source: DowJones Newswires, Reuters News, Bloomberg  or Company Press releases

12-month (daily): Stochastics, MACD, ADX (Trend strength), RSI and Momentum

Share 1wk 1m 3m 6m 1yr 2yr 3yr 4yr 5yr
Perf % 3.2 3.7 19.6 23.5 42.2 69.3 19.6 -12.3 -23.9
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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

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