Can Unilever shares find the sweet spot?

by Alistair Strang from Trends and Targets |

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With Unilever shares rising again, this analyst assesses the odds of further success.

The name behind an impressive number of brands appears to have a sweet tooth. Unilever's (LSE:ULVR) Food & Drink division in the UK is biased toward ice creams, making us wonder if the stress of Covid-19 increased comfort eating to levels which will reflect on their accounts. Eight household name ice cream brands tempt, amongst a rather more mundane shopping trolley of famous names such as Knorr, Bovril, Pot Noodle and inevitably, the dreadful product, Marmite.

The company's share price has achieved something quite rare amongst FTSE 100 components, breaking above its pre-Covid level of £47, flourishing for a few months, and now sinking once again below this price level.

It is quite surprising behaviour but, when we zoom out, it is broadly in line with the share price's level of hesitation since 2017. Essentially, the share price has been pivoting above and below the 4,500p level with many in the market doubtless convincing themselves Unilever has a “floor” around 4,000p. We’re not certain this is graven in rock anywhere, perhaps in ice cream. As a result, future closure below 4,000p is liable to see the share price melt.

Reversal such as this risks triggering weakness to an initial 3,608p. Visually, given the level achieved during “The Covid Bottom” of March 2020, there’s a strong argument favouring a bounce if such a target appears, but we shall worry should the price find an excuse to break the 3,600p level.

In such a scenario, we can calculate a further secondary drop target of 3,068p. The visuals alone tend to suggest a very real risk of the share moving down to a new trading range, potentially between the £30 level and the previous £40 level.

As always, we can offer an alternate scenario. Should the share price find sufficient strength to exceed 4,130p, recovery to an initial 4,323p works out as possible with secondary, if exceeded, a more useful 4,939p and some hesitation.

Source: Trends and Targets. Past performance is not a guide to future performance

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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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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