Woolworths disappointed investors this week when it announced same store sales growth of 2.1% in its Food & Liquour business. Coles blitzed them with 4.3% growth.
Last week, the market pushed Woollies shares up to around 17.4 times expected earnings for 2015.. In charting terms, the share price peaked at the 40 week moving average. By yesterday, the valuation had retreated to around 16.25 times earnings
If you are in the camp that reckons in these low interest times, a PE of 16.25 and a dividend yield of around 4.5% will prove too tempting for yield starved investors, then the current support may be of interest. It includes trend line support and the 38.2% Fibonacci retracement just below at $32.91. For good measure the swing down from ‘B” to “C” is about the same size as the swing down to “A”
However, many might consider that given Woolies’ competitive challenges and ongoing problems with Big W and Masters, a valuation more like 15 times earnings and a dividend yield of 4.75% is appropriate. If you are in that camp, the 50% retracement level at $31.06 comes into focus