A Weird Thing to Consider When Looking at the Coles Share Price

At time of writing, the Coles Group Ltd [ASX:COL] share price is up marginally by 0.11%, trading at $18.76.

The COL share price has a nearly 40% return in a 12-month window and is on a significant run up the charts from the March market lows:

ASX COL - Coles Share Price Chart

Source: tradingview.com

This shows up as strong upwards momentum in its 20- and 50-day moving averages. Here are two weird things to consider when looking at the COL share price.

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Fear makes Coles look like a growth company not a defensive play

Looking at the chart for the COL share price, you’d be forgiven for thinking this looks like a growth company. IT’S weird.

In prior coverage of Coles, we noted how panic buying had caused large spikes in its value.

Supermarkets are considered non-cyclical until a pandemic sets in.

Then suddenly, when it’s the only place you can shop, its revenue starts to break out of the mould.

What’s more, when a large portion of investors think the same way about defensive plays, they start to charge up the chart, with seemingly little other explanation.

In the US, markets are at all-time highs, but this is largely on the back of the tech giants’ share price rises.

I think a similar thing is happening with Coles and a few other ASX giants — everyone agrees it’s the smart play, even when it’s trading at an earnings multiple north of 25.

ASX moving sideways and COL share price could lose momentum

The ASX is stuck in a sideways pattern and could continue to do so for a number of weeks.

And after a surge, the COL share price is now starting to show the first signs of a similar pattern.

At some point, you would think the panic buying will be priced in and a recovery in other parts of Australia could mean sales will drop.

Earnings at the halfway point of the year were mixed — explaining how the ASX is stuck on neutral.

To a degree, the COL share price reflects a captive audience on the retail front and its next earnings could reveal a fall-off in revenue comparable to recent results.

Regards,

Lachlann Tierney,
For The Rum Rebellion

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Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


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