Next share price explodes as retailer predicts a summer spending spree

    • By
    • October 26, 2023
    Next share price explodes as retailer predicts a summer spending spree
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    Next’s share price jumped by 7.5% yesterday, as investors responded positively to the company’s strong second-quarter sales report.

    After a recent dip, Next plc (LON: NXT) rebounded on Wednesday, thanks to an 18.6% increase in sales for the last quarter.

    With the UK economy back in full swing, the retailer is capitalizing on the timing. Next predicts pre-tax profits for 2021 could reach up to £750 million, an increase of over £30 million from last year.

    Analysts are optimistic about the next few months, noting that consumers have extra cash from reduced foreign holidays and increased savings during the pandemic. This extra spending power is expected to boost the discretionary consumer sector, with people more willing to spend on new clothes and home goods.

    Next’s strong performance earlier this year had driven its share price to a record high of 8,404p. However, by the beginning of this week, the price had dropped by 14% from the May 6th peak.

    Given the positive trading outlook, there’s a chance Next could hit new highs soon.

    The daily chart shows a remarkable turnaround in the share price. Last week saw increased selling, which continued into Monday, likely due to profit-taking before the trading update. On Monday, Next’s share price closed below the 200-day moving average for the first time in nearly a year.

    However, Wednesday’s surge not only reclaimed the 200 DMA at 7,462p but also surpassed the 50 DMA at 7,954p and the 100 DMA at 7,919p. By the end of the day, though, Next had fallen back below the 50 and 100 DMAs.

    If Next can close above 7,954p, the share price could rise towards the top end of an upward trend line from December 2019. This trend line has been a significant resistance level and has caused reversals from previous 2021 highs. If this pattern continues, Next could set a new record for the fourth time this year.

    Conversely, if the share price fails to hold above 7,954p and falls back, the 200 DMA at 7,462p might become a key target.

    Given the current momentum, a new all-time high seems more likely.