Woolworths is Trending Down: When is it Time to Buy?

Woolworths is grappling with a perfect storm—strikes at its distribution centres have caused empty shelves, frustrated shoppers, and a jaw-dropping $50 million sales hit. Workers are demanding safer conditions and better pay while negotiations with the United Workers Union (UWU) remain at a standstill. For investors looking to take advantage of negative news, this chaos might scream, "Buy in the dip!"—but is it really time to make your move?

How far will Woolworths fall?

The supply chain disruptions across Victoria, New South Wales, and the ACT have left Woolworths scrambling. Beyond the immediate crisis, these labour disputes raise concerns about long-term risks: reputational damage and rising operational costs. Yet, Woolworths’ history of resilience—from navigating the pandemic to overcoming past challenges—shows its ability to bounce back. Still, in the stock market, timing is everything.

Turning to the share price, Woolworths has been in a steady decline since reaching its peak of $42.66 in August 2021. The recent break below the critical $32 support level—historically a strong foundation for upward price movements—raises concerns about further downside. With the stock showing no signs of stabilizing, attention now turns to historical support zones at $26 and $21.

Given this, patience is the best play right now until Woolworths finally finds its footing. If buyers emerge around key support levels, then the recovery could offer an outstanding buying opportunity. But for now, investors should keep their powder dry and wait for signs of a confirmed turnaround before taking the plunge.

What were the best and worst-performing sectors last week?

The best-performing sectors included Information Technology, up 1.96 per cent, followed by Consumer Discretionary, up 1.73 per cent and Consumer Staples, up 0.57 per cent. The worst-performing sectors included Real Estate, down 2.65 per cent, followed by Utilities, down 1.27 per cent and Energy, down 1.02 per cent.

The best performing stocks in the ASX top 100 included Block Inc, up 7.73 per cent, followed by Metcash Ltd, up 7.37 per cent and Pro Medicus, up 6.44 per cent. The worst-performing stocks included Iluka Resources, down 11.65 per cent, followed by Northern Star Resources, down 6.62 per cent, and Pilbara Minerals, down 5.86 per cent.

What's next for the Australian stock market?

The All-Ordinaries Index climbed to a new all-time high last week, gaining over half a per cent early in the week. However, Friday saw sellers emerge to close the week slightly down. While overriding sentiment is still bullish, short-term signs of a slowdown are beginning to surface. Let’s break it down.

The index has achieved new highs in four of the past five weeks, but the momentum behind these gains seems to be waning. For instance, in the week ending 22 November, the All Ords posted a weekly range of more than 2 per cent. The following week, this range narrowed to around 1.5 per cent, and last week, it was below 1 per cent.

This deceleration in momentum and volatility suggests the market may be gearing up for a pullback. Adding to the complexity is December’s historical trend of strong market performance. Therefore, one plausible outcome could be that the index retreats to around 8,500 points over the next few weeks before rebounding in late December to close the month in positive territory.

So, if you’re not already holding positions, this week and next might not offer the best opportunities from a risk-reward perspective. Exercising patience could open the door to a favourable entry point before the year ends. Still, it’s essential to focus on individual stocks rather than relying solely on the index, which reflects overall market sentiment but doesn’t necessarily predict the performance of specific shares.

Zooming back out, buyers have dominated the market in 2024, and there’s little right now to suggest this trend won’t continue as we move into 2025. Therefore, keep watching for new buying opportunities to ride the bull market until sellers decide to finally come to the party.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.