After an hour of trading on Wednesday, shares of online grocery store Ocado were up by 3.6 percent. The second half of the year was particularly difficult for the company due to a drop in online sales following the lifting of covid-19 limitations in the UK.
The prospect of new restrictions is good news for Ocado
The bad performance by Ocado this year can be attributed to the normalization of the British economy and a return to the “old” retail purchasing habits. However, this may change soon. Some people are calling for restrictions to be reinstated after an uptick in Covid-19 instances in Britain recently.
On Monday, the UK recorded 43, 738 new cases on Tuesday, slightly lower than the 49, 159 new cases recorded on Monday. Nonetheless, this shows a return to the high figures recorded in July. This represents a reversal of the big gains made over the past three months, with renewed calls for institution of a “Plan B”. This could trigger the return of new restrictions.
Long-term performance remains uncertain
Reintroducing restrictions as we approach the peak shopping season would be bad for many merchants. However, the move might improve the share price of Ocado. A corporation can’t grow by relying on further constraints, however. However, counting on new restrictions does not seem like a sustainable way to grow a company. Therefore, long-term investors may opt to keep off the company’s shares.
Nonetheless, company insiders seem to have an optimistic view of its growth prospects. In total, two insiders paid UK£299k for the company’s stock, although none of them ever sold it. That’s encouraging news for the future of the business.
Technical analysis for Ocado share price
Ocado share price has been on an uptrend for the whole week and is likely to sustain the rise, going by a mostly strong momentum, signaled by the RSI at 57. If the bulls sustain the uptrend, they are likely to push the share price to encounter resistance at 1839p. On the other hand, a reversal of the trend will likely find the first support at 1,780p, which corresponds to the neckline of the previous head and shoulders pattern. Further downward action could see the second support being established at 1,687p, beyond which the next target will be at 1,625p.
