Tesco shares may shrug off massive full-year loss
Ken Odeluga April 20, 2015 1:03 PM
<p>Updated 0838 BST Tesco could cap off the worst financial year in its history on Wednesday by unveiling a loss of as much as £5bn, according […]</p>
Updated 0838 BST
Tesco could cap off the worst financial year in its history on Wednesday by unveiling a loss of as much as £5bn, according to news reports.
If so, Britain’s largest supermarket chain would deliver what The City hopes will be its last negative surprise for some time.
Whilst large investors already foresaw a weak full-year outcome, consensus forecasts suggest Tesco’s net income could still be £790m in the black.
However, including a long-anticipated write down on the value of some stores bought during times of highly inflated property prices, now widely estimated to be at least £3bn, the final result could be much worse.
Tesco warned some time ago that trading profit for the year that ended in February would be no more than £1.4bn versus £3.3bn in the year before.
A result that’s billions of pounds in the red would therefore still be something of an unpleasant surprise compared to expectations.
But it’s one which the market had at least already factored in as a risk months ago.
Tesco’s disclosures over the past year have indeed been shocking.
However, it looks like the worst of its troubles have now been publicized, and there would seem to be little justification for the shares to pierce recent support circa 232p
Traders of Tesco Daily Funded Trade are still likely to be cautious about pushing the title back above a recent sticking point at 236.56, in reaction to the news reports on Friday.
But there are signs that the sting from the Friday’s news might only be a relatively blunt one now, with the shares still more than 20% below their value from about a year ago, even after gaining about 60% since December.
The Tesco trade within City Index was already looking oversold on a short-term basis.
The title can be expected to rise early on, although no formal signal has been issued from the trading signals attached to the chart since a ‘go long’ was triggered by the Slow Stochastic Oscillator on Friday.
That one remains in effect.
In fact, the next signal from the stochastic-based system might be a ‘sell’, judging by the steep ascent of its moving average (MA) lines.
The other sub-chart above showed a MACD-based trading system.
The MA lines on this one were also pointing upward.
But their depth within negative territory (indicating a selling bias) showed the long trade was far from overcrowded around an hour and 40 minutes into the session.
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