Majestic Wines: Strong bullish RSI divergence hints of recovery

With Majestic Wines (LON:MJW) we have yet another of those big name High Street retail sector conundrums to chew on, both from a fundamental and a technical perspective.

I have to admit that I was actually somewhat disappointed in the wake of hearing the latest update from discount alcohol seller Majestic Wines, where my initial reaction from the interim results was negative. This was not unjustified given the revelation of a £4.4m loss and what appeared to be a token attempt at buttering-up shareholders with the reinstatement of the dividend. However, to placate the doubters the group served up a 10.6% rise in underlying sales, and promised to hit sales of £500m by 2019. This is clearly nothing to be sniffed at, with the advantage in terms of the company valuation being the fact that the stock has been pounded in recent months.


Indeed, from a charting perspective it would appear that the bulls had been getting their teeth stuck into the stock even before the latest trading update. Despite the lower share price lows since the gap down to 290p in September, we have been treated to higher RSI traces in the oscillator window. All of this suggests buying pressure for the stock, with the ideal scenario being that while above 290p/the 10 day moving average, we could be due a push back up to at least the old June floor at 346p. However, only a weekly close back above this old support would really flag a ‘safe’ and sustained recovery.