What Happened to the Woolworths Share Price?
Woolworths Limited [ASX:WOW] is predominantly a supermarket retailer. However this conglomerate also includes liquor stores Dan Murphy’s and Cellermasters, Big W discount department stores, Masters Home Improvements, and petrol business through the Caltex/Woolworths service station partnership.
At the time of writing, WOW shares were trading at $21.71.
What’s going on at Woolies?
Don’t get too excited about Woolworths, this stock is going down. Woolworths has been plagued by Masters, the unexciting Big W chain and an internal management merry-go-round for the past 12 months.
The Age reported this morning that there are whispers a capital raising for the stock may be in order.
If this is true, it would be bad news for existing shareholders, as it would dilute the value of Woolies stock further.
Furthermore, this year’s financial results will show if there’s been a turnaround in Big W. Woolworths has spent nearly two years trying to return Big W to a profitable business. While I expected this to show in half year results, it didn’t.
What now for Woolworths Ltd?
ASX data shows 97 million Woolworths shares were shorted by the end of last week. Roughly 7% of all the shares on issue. This is compared to 1% of Woolies shares being shorted in 2014.
Don’t let WOW’s 2.71% rally in the past three week fool you. It doesn’t have legs.
The stock is now trading at levels not seen since the second half of 2006.
But at this stage, with see-sawing markets and negative sentiment surrounding the conglomerate, I expect Woolworths to continue it’s down trend.
While the $20–21 price point appears to provide technical support, WOW shares are consistently testing this level.
However, if WOW breaks this, the next level of support for the stock sits at $10–11. A price WOW shares haven’t traded at since the first half of 2006.
Long term investors would want to stay away from WOW until the share price confirms an uptrend.
Short term traders, however, should get ready to short sell Woolworths.