The Ocado share price sunk to a new 2020 low on Tuesday following a devastating fire at a London fulfilment centre that caused severe supply disruptions.
Ocado Group plc (LON: OCDO) edged slightly higher yesterday, finishing Wednesday at 1,786p, increasing just +0.001% on the day.
As if Ocado didn’t have enough on its plate already, a second warehouse fire in as many years adds to the woes.
Customers in the South-east of England saw food deliveries cancelled after a fire ripped through Ocado’s huge fulfilment centre in Erith, S.E London. Subsequently, orders we re-routed as far as 145 miles away to Dordon.
Long term investors in Ocado will recall, this is not the first time its automated employees have caused a fire. In 2019, Robots were responsible for a blaze that resulted in £100m of damage to the firm’s facility in Andover.
The resulting sell-off in the Ocado share price extended the decline from February’s 2,884p high to 40%. Furthermore, the price has retreated to the support of a descending trend line that could trigger a steeper decline if broken.
OCDO price forecast
We see a clear double-top on the daily chart following the reversal from the February high. Moreover, the share price has been in almost constant descent from this point.
Furthermore, the negative trajectory has resulted in the 50-day moving average crossing below the 100 and 200 DMA’s.
However, a commanding downtrend from August 2020, at 1,720p, has so far halted the decline. Although, if OCDO falls below this trend, the next support is 1,395-1,440p.
Therefore, Ocado must stage a recovery from here. In that event, the 50 DMA at 1,918p seems a logical target price. Whilst this would stem the losses until the Ocado share price breaks ground above 2,000p, the outlook remains negative.