Burberry share price pattern points to a pullback unless this happens

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Burberry (LON: BRBY) share price has done well in 2023 as investors place their bets on the reopening of Hong Kong and Mainland China. The shares jumped to a high of 2,603p in March, the highest point on record. In all, it has soared by over 21% this year, which is a better performance than the FTSE 100 index. It has outperformed other European luxury giants like Kering and LVMH. 

Burberry stock vs LVMH, Kering, Hermes

Burberry’s turnaround strategy

Burberry is a leading luxury goods company that sells its products internationally. Together with Aston Martin Lagonda, they are the only two listed companies in the London Stock Exchange. The two companies have all gone through a rough patch in the past few years. 

For example, Burberry saw it market being diluted by excessive selling while Aston Martin went through financial troubles. In 2022, the company raised equity from its biggest shareholders and Saudi Arabia’s Public Investment Corporation.

The two brands have lost market share to their European rivals. French and Italian brands dominate the luxury goods market while companies like Ferrari and Porsche are leading the hypercar market.

Burberry is now implementing a turnaround strategy that the CEO believes will push its annual revenue to over £4 billion in 2025. It also aims to double the sales of its shoes, handbags, and accessories by 2027 by emphasizing its Britishness.

As part of the strategy, Burberry is investing in its Chinese business, which dragged its business in 2023 because of its Covid restrictions. The firm aims to be the go-to brand for customers seeking affordable luxury clothes and apparel. Its items tend to be a bit cheaper than those of popular brands like Kering and Hermes. Burberry also hopes to become the leader of the luxury outerwear market.

As the luxury goods market has become highly competitive, there have been chatter that Burberry could be acquired by one of its European rivals. No deal has been announced but it is highly possible considering that luxury houses like Kering and LVMH are flush with cash as their stocks trade at a record high. 

Burberry share price forecast

BRBY chart by TradingView

The daily chart shows that the BRBY stock price is trading at an important level. It is trading at 2,500p, which is slightly below the year-to-date high of 2,591p. This is important because it seems like the stock has formed a double-top pattern, which is usually a bearish sign. The stock remains slightly above the 25-day and 50-day exponential moving averages.

Therefore, because of the double-top pattern, there is a likelihood that the stock will retreat in the coming weeks and retest the neckline at 2,218. A bullish breakout will only be confirmed if the price moves above the key resistance at 2,591p.

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