Tesco share price is trading lower this Wednesday as the company reports that its costs are mounting and could dent its revenue surge as the coronavirus epidemic ravages the UK.
Tesco Plc had earlier announced plans to pay a full-year dividend along with a special payout of £5bn after revenues soared more than 30% on panic buying by citizens desperate to avoid being stranded by lockdowns. However, costs have risen as the company had to take on more than 45,000 new workers to cope with the higher shopping demand and staff shortfalls which resulted as thousands of its workers fell ill from the coronavirus. Delivery costs have also gone up and the company estimates that its total costs could rise to £925 million. Uncertainty about the duration of the lockdown also means the company is not providing any forward guidance on its revenue numbers.
Tesco share price tanked by as much as 7.7% on Wednesday in a most extraordinary session of very choppy trading. The daily candle has now formed a Doji with long shadows, detailing how volatile today’s whipsaws on the stock were.
On the weekly chart, we see Tesco share price continuing to extend the drop after the breakdown of the symmetrical triangle and the neckline of the double top which I identified in a previous analysis of this pair.
Tesco share price has now entered into the support zone that lies between the 215.5 and 209.5 price levels. A breakdown of this support zone opens the door for Tesco share price to continue its descent, targeting the 8 January, 3 April and 12 November 2018 lows at 200.0, with 194.1 and 190.1 assuming relevance as possible support areas if the support at 200.0 fails to withstand further slide in Tesco share price.
On the flip side, price recovery from a bounce on this support zone targets the 10 June 2019 and 24 February 2020 lows at 219.5 as these lows act in role reversal. 229.9 and the previous neckline of the recent double top at 244.8 are also possible upside targets if traders decide to ignore the rising costs and focus on the dividend payouts as potential incentives to place bids on the stock.