Ocado shares up nearly 10 per cent as traders withdraw from short positions

*Analysis from Shore Capital

Internet grocer Ocado has seen a second day of strong gains with shares up nearly 10 per cent today as traders withdraw from short positions. Ocado closed up by around 13 per cent yesterday.

Ocado shares have performed well following the announcement of a deal with supermarket Morrisons, despite concerns that this could mean that Waitrose won't renew.

The firm's sourcing agreement with Waitrose is due to run until 2020 but there is a break clause that could be exercised in 2017.

Darren Shirley, Shore Capital:

The stock has got a clearer visibility especially for the next two to three years thanks to the deal with Morrisons, that might be one possibility. Maybe you get a broader base of investors wanting to become involved in the stock.

Rumours of an M&S takeover have reappeared after the surge in interest, the key connection here being Sir Stuart Rose. Now chairman of Ocado, Rose is a former M&S boss.

However at a recent meeting, current M&S boss Marc Bolland categorically denied the possibility of any future acquisitions in the short term.