Should you continue to hold Sainsbury's shares?

Supermarkets generally do well out of a major crisis. Our chartist analyses this major catalyst.

Sainsbury's PLC (LSE:SBRY) 

With all this Brexit hullabaloo, we've a sneaking suspicion the markets anticipate the major supermarkets to do rather well in the event of any supplies crisis. After all, in times of shortage or disruptions, retailers price goods against "worst possible" scenario.

Almost accidentally, they will generally do rather well out of a major issue as the need for "special offers" or price comparison vanishes.

• Sainsbury's a rare riser on grim day for FTSE 100

Already, Sainsbury's (LSE:SBRY) are poised at the starting gate for some reasonable share price movements.

Essentially, there looks like a trigger level of 225p which, if exceeded, allows price growth to an initial 238p.

Better still, if exceeded, this allows ongoing travel toward a secondary calculation of 284p.

Beyond 284p, we shall need to re-examine the tea leaves (if we can afford them) as some quite extraordinary longer-term movement becomes possible.

Of course, there's a fly on the soufflé.

Regular readers will be aware of out historical hysteria over gap up / gap down movements on shares. On many occasions, they proved incredibly reliable indicators for serious trouble ahead and in the case of Sainsbury's, it produced a couple of textbook warning gaps. We've circled them on the chart.

Unless Sainsbury's actually makes an effort to close above 225p anytime soon, it's trading in a region where below 192p risks reversal down to an initial 167p. Worse, if broken, our longer term secondary (and hopefully bottom) calculates down at 138p.

We can go lower as ultimate bottom, the point we cannot calculate below, is at 100p. At present, nothing threatens such a calamity.

Source: Trends and Targets      Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.