Dis-chem Pharmacies

Wins at the back

The vaccination roll out is a good thing for Dis-chem. The slower the roll out the better because it means more foot traffic into the Dis-Chem. South Africans coming in for a vaccination and some picking up a snack or two and items at the stores on the way out. Moreover even those who aren’t picking up anything are more exposed to the products in the store. This is essentially free advertising for Dis-chem. Notwithstanding tough competition from Clicks. The company has been growing earnings since listing until lockdowns came around. Given the above I’m anticipating earning to recover back above the 2019 comparable period.

Looking at the charts

The stock had a strong run since the 2020 lows, doubling within the period. We had then had a golden cross as the stock looked to retrace and test the old resistance around R27. The R27- R29 eraa is a great buy area. With a tight stop around R25-26 just below the support line. The odds are much better back above the R32 resistance for a short term target challenging the 2018 R40 highs.

Zooming a bit closer

The stock lost its will to rise post the dividend. Subsequently slipping below the 50 day EMA at the back of the founding. We have to wait to see how the 200 day EMA defends the price. If the 200 day EMA holds as support, and monitoring price action around the 200 day EMA. The R27 level is a good place to start building the position. And increasing the position when the stock is back above R32.50. It’s the first time since the golden cross that the stock takes a shot at the 200 day EMA. The likelihood of the moving average holding is pretty good.

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