Supermarket boom will continue

WHILE retailers on the high-street have been struggling with adverse weather conditions and consumers cutting back on spending during a downturn, their supermarket counterparts have been going from strength to strength. Giant grocer Tesco has seen its share price rise 10 per cent over the past six months and today’s full-year results are expected to reveal an 8 per cent growth in top-line sales figures and a 13 per cent growth in core operating profit. Rival J Sainsbury has seen its stock rise 6 per cent since the start of the year and WM Morrison is up 5.3 per cent over the same period compared to 3.84 per cent for the benchmark FTSE 100 index.

Unlike high-street retailers that sell non-essential items, food retailers have managed to hold up thanks to the necessity of their products and their ability to slash costs to attract sales. Tesco undoubtedly still occupies pole position and it controls 30.3 per cent of the market, according to the latest Kantar Worldpanel survey. Despite its size, Tesco is still managing to outperform its rivals and a long position would be worth consideration for contracts for difference (CFDs) traders.

Nomura analysts Matthew Truman and Paul Diamond expect robust results from the grocer today thanks to a strong relative uptick in UK trading, a recovering international top line and the confirmed reduction in debt. Beyond the results, they think it offers strong growth characteristics and importantly, that this growth remains sustainable.

Truman and Diamond say the valuation remains compelling and they are happy staying buyers at the current share price of 435.98p. Time to offset some of those shopping bills and go long on Tesco.


Tuesday 20 March
Tesco – UK
Associated British Foods – UK
SAB Miller – UK
Reed Elsevier – UK
BNY Mellon – US
Coca-Cola – US
Goldman Sachs – US
Johnson & Johnson – US
Apple – US

Wednesday 21 March
Game Group – UK
McDonald’s – US
Morgan Stanley – US
Boeing – US
Wells Fargo – US
PSA Peugeot Citroen – France

Thursday 22 March
WH Smith – UK
American Express – US
Marriott International – US
Microsoft – US
Philip Morris – US
L’Oreal – France


My pick: Book profit and look to sell the FTSE 100 at 5,700
Expertise: Technical analysis
Average time frame of trades: 5-10 days

The market has stalled out on rallies above 5,800 at the 2010 high of 5,834 and well before our 6,000 long objective. It looks to be in the process of potentially carving out a more meaningful top. We have been long for a couple of weeks back at 5,700 and will now book profit on our long position in the mid-5,700s, and consider reversing in anticipation of a more sizeable pullback over the coming weeks. Sell at 5,725 with a target of 5,600 and a stop at 5,850.

My pick: Sell the Dow Jones index
Expertise: Global macro
Average time frame of trades: 3 months

Stocks, commodity futures, higher yielding currencies and other leveraged securities are likely to remain under heavy selling pressure until the Goldman Sachs accusation of fraud by the United States’ Securities and Exchange Commission (SEC) is fully clarified. Investors should also be concerned about Greece, which is still struggling with the International Monetary Fund (IMF) and the European Union regarding its massive debt troubles.

My pick: Short gold at $1,131.15
Expertise: Global macro, classic technical analysis
Average time frame of trades: 1 week – 6 months

Gold has moved sharply lower since putting in a dark cloud cover bearish reversal candlestick formation below the $1,170 level. Friday’s revelation that the SEC has moved forward with a regulatory action against Goldman Sachs has set off sharp risk aversion and pushed prices through the range’s lower boundary at $1,145. I will enter short from here, targeting the next layer of horizontal support at $1,088.50. A stop-loss will be activated on a daily close above $1,151.85.