Unilever stock price signals a bullish buy on weekly chart

Unilever stock price signals a bullish buy on weekly chart
Written by:
Michael Harris
November 29, 2020
  • Unilever to unify its operations and abandoned the previous dual-headed legal structure
  • “It’s a seminal moment in Unilever’s history,” said Warren Ackerman, an analyst at Barclays
  • Unilever stock price closed about 3% higher despite a plunge in the price action earlier this week

Shares of Unilever PLC (LON: ULVR) managed to close about 3% higher despite a plunge in the price action earlier this week. 

Fundamental analysis: “A seminal moment”

Unilever plans to unify its dual-headed legal structure to a single mother company and exchange its Amsterdam-listed shares for Unilever PLC. 

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The dual-headed structure of the consumer goods company will end after 90 years operating as a hybrid corporation. The decision comes as a result of the coronavirus-induced crisis and approaching Brexit. 

The unification is unlikely to have a great impact on the company’s daily operations but it will provide it with more flexibility when it comes to buying and exiting businesses, as well as offer better corporate governance, said Unilever. 

“The boards consider that unification is in the best interests of Unilever, its shareholders and other stakeholders taken as a whole,” Unilever said last month.

From November 30, Unilever will start trading as a single company listed in London and as an American depositary share in New York. The Plc will also be listed on the Euronext in Amsterdam.

“It’s a seminal moment in Unilever’s history,” said Warren Ackerman, an analyst at Barclays. Ackerman pointed out that the last four Unilever’s chief executives unsuccessfully attempted to change “an outdated 90-year-old legal system that makes them very slow to act on anything”.

Ackerman said Unilever’s move was essential to his investment case in the company, which will try to close the valuation gap between itself and its competitors. 

Unilever said the unification will make it easier now to buy businesses and spin-off, unprofitable divisions, giving rise to rumours about larger transformational deals.  Analysts from investment banking company Jefferies said Unilever’s weight in FTSE 100 index will more than double to 3.9% following the unification. 

Technical analysis: A bullish signal on the weekly chart

Unilever share price managed to close in the green after travelling south at the beginning of the last week to record a 4-month low at 4322p. As seen in the weekly chart below, the price action touched the 200-WMA and rebounded strongly. 

Unilever stock daily chart (TradingView)

A rebound in the price action resulted in a 4586p weekly close, enough to stay above the 100-WMA indicator. A lower low and higher close created a bullish weekly candlestick, which could pave the way for a push higher in December with the first target higher located around the 4800p handle. 

Summary

Consumer goods maker Unilever will ditch its dual-headed structure and unify into a single London-based company, a move that will improve its corporate governance and make it easier to buy and exit businesses. In the meantime, Unilever stock price created a bullish signal on the weekly chart.