zak mir & the not so “super”markets…

3 mins. to read

My view on a fundamental basis is that the UK supermarkets are such an evil cartel that they make the UK banks appear to be a charitable entity! That they have even managed to resist the meddling of the EU over the past couple of decades is a wonder. Indeed, it would not be surprising if our “friendly, neighbourhood grocers” were paying sponsors of the campaign for the UK to escape the clutches of Brussels. Those who disagree should probably go and chew on some horse meat! Actually, you probably already are if you’ve been shopping for tinned meat recently… But that’s another story!!

As far as the charting positions of the companies involved in this little sector of the market is concerned, it seems wise to take the worst first of the bunch first. Looking at the daily chart of Morrison Supermarkets (MRW) we can gain an insight as to why the Northern England focused group chose to get into bed with the hitherto non-profit making organisation and supposed online grocer known as Ocado (OCDO). I would personally call it “clutching at straws”, with the irony here being that even after risking the wrath of Waitrose it looks as though Morrison’s is still in deep trouble amidst the killer competition it has to face.

2013 on the daily chart delivered a perhaps apt “M” shaped double top, with the recent sell trigger being the loss of the 200 day moving average now at 277p at the beginning of November. The risk is that unless we are treated to a swift recovery of the February 2013 floor at 247p there could be follow on losses towards 220p – the measured move target of the 50p wide M shaped bear formation (270p – 50p). In the meantime one would be a seller into strength towards the top of today’s gap / 250p.

Whilst Morrison’s is a company where one might be wanting it to do well if it possibly can, for many I don’t doubt that the same would not be applied to Tesco (TSCO). This is an entity where its merits have always escaped me, and now that they have apparently faded, there really does not appear to be any USP at all. The charting position for the UK’s number 1 grocer appears to be becoming progressively more bearish with time, something which is said currently on the basis of the M shaped top formation from last year on the daily chart, and the way that we have seen so many failures at a line of resistance from July last year. The implication is that despite today’s initial bear trap rebound from below 320p we may still have to face a March 2013 price channel floor destination under 310p before this stock eventually finds its feet.

Before traders start metaphorically slashing their wrists at both the technical and fundamental prospects as far as the supermarkets are concerned however, it may be worthy looking at one play whether there may be cautious grounds for optimism. This is M&S (MKS), where ironically the bad sentiment and bad publicity may have ensured that the uptrend visible here within a rising trend channel on the daily chart from March last year is a long opportunity (as in “climbing the wall of worry”). Indeed, while there is no end of day close back below the green 10 day moving average at 441p it may be that we see decent progress back towards the main post September 500p – 520p resistance zone over the course of January / February. Only cautious traders would wait on a sustained clearance of the black 200 day moving average at 460p before taking the plunge on the long side after the brief bear trap from below former November support at 431p.


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