Dis-Chem Pharmacies Limited (JSE: DCP) has maintained a steady course in recent weeks, exhibiting a lateral movement as the market seeks clarity after a robust upward trend that propelled the share price to a 17% gain over the last six months. This resilience is noteworthy, considering the company’s disclosure of a 17.2% decline in half-year earnings late last year, signalling the challenges posed by a constrained economic environment, elevated interest rates, and escalating costs.
Despite these hurdles, management expresses optimism regarding a more robust performance in the second half. With a highly anticipated trading update scheduled for release on the 23rd of February, investors eagerly await additional insights into whether the company has indeed delivered the anticipated stronger performance in the latter part of its fiscal year.
Technical
On the daily chart, the price action is moving in a channel formation. The 25-SMA (green line) and 50-SMA (blue line) provide support at the channel’s base and could underpin the bullish momentum. However, potential divergence in the RSI could signal that a pullback to the downside may be on the cards.
A channel breakdown could be triggered if the price moves below the R29.46 support. In that case, support at R28.73 could be a pivot point for a retest of the breakdown level. However, should the price move lower, it could look toward R27.46, with the 100-SMA (orange line) potentially holding buyers not too far below.
However, if support at R29.46 holds, the price could continue its attempt to break through the supply zone at R30.56. Any breach of this zone could set the price up for a test of resistance at R31.27. If the market fails to initiate a retracement off this level, the bulls could continue their ascent toward R32.00.
Summary
After Dis-Chem reported a steep drop in earnings last year, the market remained confident in its ability to bounce back in the second half of its fiscal year. The upcoming trading update in February could offer additional insights that could drive the price action toward a new directional trend.
Sources: Koyfin, Tradingview, Dis-Chem Pharmacies Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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