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Ocado Share Price Unraveling Could Push it to 505p

Ocado share price has been in a recovery mode in the past few days as investors focus on the new Lizz Truss administration. The OCDO shares rose to a high of 775p, which is much higher than the year-to-date low of 672p. The stock remains about 75% from its highest level during the pandemic boom. 

InvestingCube's S&R Levels

FTSE100

FTSE100 (7031)

In Profit

STOP

SELL

TP1

7146

TP2

7127

Is Ocado a good buy?

Ocado share price has been in a strong bearish trend in the past few months as investors have worried about the soaring inflation and weak demand for online shopping. Data released recently in the UK showed that inflation has jumped to the highest point in decades.

As a result, consumers are expected to tighten their belts since wages are not growing as fast. This explains why workers in companies like BT and Royal Mail have gone on strike recently. At the same time, demand for online shopping has slowed dramatically in the past few months now that the UK and its other key markets have reopened. As a result, the size of the average customer basket has continued to fall.

Ocado has also been without a head of retail following the resignation of Mel Smith. In a statement on Thursday, the company said that it had appointed Hannah Gibson to become the head of Ocado Retail. This is its customer-facing business that has a joint venture with Marks and Spencer. 

The next key catalyst for Ocado share price will be the upcoming third-quarter results scheduled for September 13. Analysts believe that the company will report weak earnings because of the challenging market conditions.

Ocado share price forecast

The weekly chart shows that the Ocado stock price has been in a strong bearish trend in the past few weeks. During this time, the stock formed a bearish flag pattern that is shown in red. The downward trend is also being supported by the 25-week and 50-week moving averages. 

Therefore, I suspect that the OCDO share price will continue to fall in the near term. If this happens, the next key resistance level to watch will be at 505p, which was the lowest level on April 9 2018. The stop-loss for this trade will be at 845p.

Ocado share price