The Tesco share price has pulled back after hitting an all-time high in November. It fell by 11% and was trading at 425p on Wednesday, down from 481p. This drop has put the stock into what traders call a correction. Analysts say the near-term trend points to more downside, but there are reasons for optimism.
Looking at the charts, Tesco’s stock has moved below key technical levels. It fell under the 23.6% retracement at 438p and the Supertrend indicator turned red. The stock is also trading below the 50-day and 100-day moving averages. These signals show that sellers are in control. At the same time, the stock formed a bearish flag pattern, which often means further declines are likely.
If the downward trend continues, the next potential support levels are at 411p and 390p. On the other hand, if the stock climbs back above 438p, the correction could end, and it might start moving toward the all-time high of 481p again.
Despite the technical weakness, Tesco’s business fundamentals remain strong. The pullback comes after a big run-up from 300p in April to 481p in November. This recent dip could be a good entry point for long-term investors.
Tesco may also benefit from rising inflation in the UK. The retail price index rose from -0.4% in November to 0.7% in December, and the annual increase reached 4.2%. The consumer price index also ticked up from 3.2% to 3.4%. High inflation can make Tesco attractive because shoppers see it as offering lower prices, and the company earns higher margins.
Recent business numbers support a positive outlook. Sales rose 3.1% in the third quarter and Christmas sales were up 2.4%. Tesco’s market share is now at its highest in over ten years, helped by investments in the shopping experience and price match features. Online sales also grew 11%.
The company continues to reward shareholders. Tesco is finishing a £1.45 billion share buyback program, and its dividend yield has risen to 3.35%. For investors, the pullback may be a chance to buy a strong company at a lower price while waiting for the stock to recover.
