Shockwaves went through the supermarket sector in the United Kingdom last week after US private equity giant Clayton Dubilier & Rice sent an unsolicited £5.5 billion offer to buy UK supermarket giant Morrisons.
The move by Clayton Dubilier & Rice was swiftly rejected, which caused Morrisons share price to surge by 35 percent in just one day. Since then Morrisons share price has been trading sideways around the top of its yearly range.
Looking at the chart Morrisons share price is now trading at levels not seen since February 2019. Morrisons share price still has some way to go before reaching its all-time price high, around the 330.00 level.
Traders and investors are now braced for the next move from Clayton Dubilier & Rice, with some analysts claiming that Morrisons could have a value of close to £6 billion, meaning that a larger counter offer still may be on the table.
Unlike its rivals in the UK such as Tesco and Sainsbury’s, Morrisons actually owns 18 manufacturing compounds around the country, which makes it one the biggest fresh food suppliers. The company also has the ability to supply huge amounts of fresh baked bread, seafood, fresh produce, and meat product.
While this is still a small portion of the overall UK food manufacturing business it is still well-above what many other supermarket operations in the UK have. This could be where a large amount of value comes form, alongside Morrisons real estate ownership.
Other UK supermarkets have been boosted by the Morrisons news, however, the next big share price move in the UK supermarket sector is more likely than not to happen for Morrisons as the market awaits the next major M&A offer.
Morrisons Short-term Technical Analysis
Morrisons has broken from a symmetrical triangle pattern in the short-term and is now consolidating around the 240.00 price area. The upside in the short-term looks overdone, so a pullback could come towards the 220.00 area.
The 220.00 level is a must bounce area in order for Morrisons to launch a quick recovery. Worryingly, a large price gap has formed on the charts and is now located between the 200.00 and 180.00 level.
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Morrisons Long-term Technical Analysis
The daily time frame shows that Morrisons share price has now reached the 50 percent Fibonacci retracement level of the 2018 trading high to the 2020 trading low, around the 240.00 level.
Bulls need to move past the 240.00 level in order to attack towards the 61.8 percent Fibonacci retracement level, at 260.00. If bulls can move past the 78.6 Fibonacci level, at 285.00, then a rally towards 330.00 should be expected.
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