Wesfarmers Ltd (ASX:WES) $190 Million Investment

Wesfarmers Ltd (ASX:WES) $190 Million Investment

Wesfarmers Ltd(ASX:WES) $190 Million Investment

  • The Wesfarmers Ltd (ASX: WES) share price has dropped 6% over the past week after the retail conglomerate warned of more price cutting and “fixed cost inflation” across its core Coles supermarkets business.
  • Today shares swap hands for $40.15, compared to prices above $43 just last week as the theory of an intensifying supermarket price war caused analysts at Credit Suisse and Citigroup to downgrade their profit forecasts for FY 2017 and FY 2018 according to the Australian Financial Review.
  • Coles invested a net $190 million into cutting grocery prices and boositng service in March and June, quarters – triple its investment int he December quarter – and may have to invest more in 2018 if Woolworths responds in kind to maintain its new-fond price competitiveness. 

Wesfarmers Limited is engaged in various business operations, such as supermarkets, liquor, hotels and convenience stores; home improvement; office supplies, and an industrials division with businesses in chemicals, energy and fertilizers, industrial and safety products and coal. The Company’s segments include Coles; Home Improvement; Department Stores, which includes Kmart and Target; Office Works; Industrials, which includes Resources, WIS and WesCEF, and Other. Coles is a supermarket retailer, which operates over 770 supermarkets. Bunnings is a retailer of home improvement and outdoor living products in Australia and New Zealand. Kmart is a retailer with approximately 210 stores throughout Australia and New Zealand. Target operates a network of over 300 stores and sells a range of products for the contemporary family, including apparel, homewares and general merchandise. Officeworks is a retailer and supplier of office products and solutions for home, business and education.

Overall, the bias in prices is: Downwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 42.64.

The projected upper bound is: 41.22.

The projected lower bound is: 38.73.

The projected closing price is: 39.97.

WESFARMER FPO SE closed down -0.090 at 40.060. Volume was 5% below average (neutral) and Bollinger Bands were 71% wider than normal.

Open         High          Low           Close         Volume
39.980      40.450      39.810      40.060      2,167,575

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period         50-period     200-period
Close:                       41.47                43.42             42.72
Volatility:                28                     18                   20
Volume:                   2,860,072      2,219,437      2,366,602

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary
WESFARMER FPO SE is currently 6.2% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of WES.AX (mildly bearish). Our trend forecasting oscillators are currently bearish on WES.AX and have had this outlook for the last 33 periods. Our momentum oscillator is currently indicating that WES.AX is currently in an oversold condition.

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 19.8895. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 11 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 26.89. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 47 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -141.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 15 period(s) ago.

 

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John Heffernan

John Heffernan is a Junior Analyst at HEFFX. John is studying Economics and is a contributor on equities at Live Trading News.

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