​​Investors await ASOS trading update with trepidation

​​​Investors await ASOS results

​ASOS, the online fashion retailer, is attracting attention this Tuesday as investors eagerly await the company's trading update, hopeful for signs of a recovery from the slump it experienced in the wake of the pandemic.

​A stellar performer during the pandemic, ASOS made headlines with its acquisition of Topshop and its sister brands for £295 million following the collapse of their parent company, Arcadia, in 2020. However, by May, ASOS found itself grappling with the challenges posed by unfavourable economic conditions, reporting a loss of £87.4m.

​As people gradually returned to in-person shopping after pandemic restrictions eased and supply issues emerged due to the conflict in Ukraine, ASOS faced declining sales and subsequent financial strain. To bolster its cash levels, ASOS raised £75 million in a new placing in May of this year.

​June figures point towards weaker trading

​While ASOS announced in June that it was on track to achieve adjusted earnings before interest and taxes (EBIT) of £40-60m in the second half of the year, its revenues had already declined by 14%. To bolster its business, ASOS has been working on converting its existing inventory into cash. Over the past two years, the company has accumulated a substantial amount of unsold clothing and other items, leading to a write-off of £130m in stock in 2022.

​Investors are keenly observing ASOS as it navigates these challenges and seeks to regain its footing in the post-pandemic retail landscape. The trading update will shed light on the company's progress and provide insights into its future prospects.

​ASOS technical view

​The early September rally in the ASOS share price to a four-month high at 474.20 pence has been followed by another down leg with the share trading down by nearly 30% year-to-date.

​The company’s share price dropped by over 55% between May and June on disappointing half-year results and despite its recent bounce remains in sideways trading range.

​ASOS Weekly Candlestick Chart

​Even though ASOS’s share price so far remains above its June and July lows at 323.00p to 322.90p, downside pressure is taking it back down towards its August low at 360.90p. If fallen through on a daily chart closing basis, the major 323.00p to 322.90p support zone would be back in the picture. Below it the July 2009 low can be found at 306.8p as well as the psychological 300p mark.

​For any kind of potentially bullish reversal to become remotely possible, the March-to-September downtrend line at 409.90p and last week’s high at 414.00p would need to be exceeded on a daily chart closing basis.

​ASOS Daily Candlestick Chart

​Only then could another attempt at reaching the August peak at 446.80p be made.

​For a long-term technical bottoming formation to be formed a rise and weekly chart close above the early September high at 474.20p would need to be seen, something which currently look pretty unlikely.

​ASOS IG sentiment

IG sentiment data shows that 97% of clients with open positions on the share (as of 25 September 2023) expect the price to rise over the near term, while 3% of clients expect the price to fall whereas trading activity over this week shows 50% of buys and this month 56% of sells.