Interactive Investor

Can this analyst’s view on Morrisons shares be right again?

15th September 2020 15:02

Alistair Strang from Trends and Targets

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There's a good chance of a rebound at the supermarket chain, but the shares might have to go lower first.

Our previous analysis on Morrisons (LSE:MRW) in February, our favourite croissant supplier, proved quite prescient, the share price indeed making a surge down to 165p. My new diet, however, ensured the morning treat of two croissant and latte has forever vanished.

There's nothing like substantial weight loss (without effort) to convert a confirmed fad diet sceptic into a true believer. For me, this Keto diet has been revolutionary. 

The big question is: will Morrisons survive our household no longer buying croissants, sugar and the odd bag of chips?

It's interesting to note their share price movements are suddenly doing something quite odd. The price successfully broke above the blue downtrend since 2018 (see chart below) and has now reversed below the trend. 

This is not an encouraging signal for a share, too often representing a ‘gotcha suckers’ pattern by the market. 

About the only nice thing we can suggest is, should the share next make it above 200p, the previous high, we'd expect it to recover extremely swiftly with 213p as an initial ambition and secondary, if bettered, at 249p.

However, the sharp price reversal below the blue downtrend usually signals the worst, implying the prior trend is influencing matters and suggesting weakness next below 177p risks an attempt at a visually unsettling 152p. If broken, bottom calculates at 137p and hopefully a proper rebound for future recovery.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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