This story features WOOLWORTHS GROUP LIMITED. For more info SHARE ANALYSIS: WOW
Bottom Line 21/10/16
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support levels: $22.28 / $20.50 – $19.76
Resistance levels: $26.05 / $28.03 / $29.22
Technical Discussion
Woolworths ((WOW)) has interests in food, liquor, petrol, hotels and New Zealand supermarkets. The latter is engaged in the procurement of food and liquor for resale to customers in New Zealand. The hotel section is engaged in the provision of leisure and hospitality services which includes food, alcohol and accommodation as well as entertainment and gaming. For the year ending the 26th of June 2016 revenues decreased 1% to A$58.28B. Net income before extraordinary items decreased 15% to A$1.95B. Revenues highlight the Australian Food Liquor & Petrol section decrease of 3% to A$39.59B. Broker/analyst consensus is a comprehensive “Sell”. Dividend yield at today’s price sits at 3.1%.
Reasons to be Cautiously optimistic:
→ CEO’s new plan could turn the company to profit from FY18
→ New strategies seen as being positive from customers.
→ Looking to dispose of its petrol business.
→ further asset sales feasible.
→ Impulsive price action higher bodes well over the near-term.
The bullish trigger last time was $23.41 with a push above portending a decent leg north. Not only was that level overcome but it’s been exceeded in a very strong impulsive fashion which suggests higher prices over the coming weeks. We all know only too well that Woolworths has taken a battering over the past few years, especially from the 2014 highs which culminated in a decline of almost 50%. However, buyers started to show themselves at the beginning of this year, resulting in a small basing pattern forming which is always something to make us sit up and take notice. As always, the upper boundary needs to be overcome before getting overly confident and this is also a box that can be ticked.
The company isn’t out of the woods by any stretch of the imagination although the smaller degree patterns have certainly taken a turn for the better which is all we can ask for. Off the July lows a strong clean trend up to the high made in late August was followed by an a-b-c correction which terminated around the 61.8% retracement level. This completes wave-(ii) or-(b) which should be followed by another strong and clean trend which is something that’s been taking hold over the past few weeks. Assuming a larger corrective pattern higher is taking place, we’d expect the wave equality projection at $28.03 to be tagged without too much trouble. That aforementioned target area would need to be overcome before thinking in terms of something more bullish longer term unfolding although we won’t dwell on the various scenarios yet, at least not until those heights come under pressure.
Trading Strategy
As always we need a low risk entry before looking to jump aboard what should be a decent leg higher meaning for the moment we must sit and watch only. A micro consolidation pattern, or even a smaller degree a-b-c corrective pattern would present an opportunity which is what we’ll be looking for over next week or two. Should price continue to blast higher immediately then unfortunately we’ll have to remain sidelined but it is one to keep on the watchlist.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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