There are certain stock market adages that are useful and reliable, in an area which is traditionally a minefield even at the best of times. For instance, “profits warning come in threes”, following significant director share buying, and in the case of Burford, avoiding companies where related parties are on the board.
In the case of Sainsbury, we are reminded of how the share price tends to rally after a CEO steps down / is sacked. The only twist on this occasion is that while the stock appears to be jumping the gun as far as Mike Coupe’s departure. While it has been reported that the grocer is scouting around for a replacement – something it is alleged is always the responsible thing to do – so far market speculation has been denied.
Clearly, once the CMA blocked the merger with Asda – and did its habitual business prevention role, it was always going to be difficult for Coupe to stay in his job. Without such a deal Sainsbury was doomed to continue the slow death experience that it and many of its non discount grocers have experienced in recent years.
What is interesting from a price action perspective is the way that the shares have bounced reasonably well off the floor of a bullish falling wedge pattern on the daily chart, and that as little as a clearance of the 50 day moving average at 195p could unleash a sizeable intermediate rally. A return to the 210p – 220p area does not seem unreasonable to expect.
This may or may not coincide with the departure of Mr Coupe. But it may be triggered on a fundamental basis on hopes that a new approach at the struggling supermarket could be on its way.
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