In a short-term bear chan­nel

Finweek English Edition - - Martketplace -

Af­ter re­port­ing rel­a­tively flat sales for the three months to end-Septem­ber, Shoprite’s share price gave in by 4.6% to 17 450c/share (at the time of writ­ing on 29 Oc­to­ber), ex­tend­ing its losses to the lower slope of its short-term bear chan­nel.

In an op­er­a­tional up­date, the com­pany said it had ex­pe­ri­enced “prod­uct avail­abil­ity chal­lenges stem­ming from the group’s largest dis­tri­bu­tion cen­tre in Gaut­eng, which ac­counts for 53% of to­tal cen­tralised food dis­tri­bu­tion” for its super­mar­kets in SA.

This anom­aly has re­sulted in a sig­nif­i­cant loss of sales op­por­tu­ni­ties, in­evitably ben­e­fit­ting com­peti­tors, CEO Pi­eter En­gel­brecht said in the up­date. Turnover has only grown 0.4% from the cor­re­spond­ing pe­riod in 2017 due to 0.1% in­ter­nal food de­fla­tion, strikes and rand strength against other African coun­tries.

The group’s core South African su­per­mar­ket busi­ness grew sales by 1.7% while the rest of Africa op­er­a­tions suf­fered an 8.6% de­cline, mea­sured in rand.The An­golan kwanza and Zam­bian kwacha have de­pre­ci­ated by 76.3% and 21% re­spec­tively against the US dol­lar since the be­gin­ning of 2018.The group’s hedg­ing strat­egy is said to have soft­ened the blow.

How to trade it:

Shoprite has been rang­ing be­tween 19 800c/ share and 17 700c/share within its bear chan­nel. Late Oc­to­ber’s news saw it trade through key sup­port at 17 700c/share on in­tra-day trade but man­aged to close above that level. Shoprite would have to trade above 19 800c/share to end this con­sol­i­da­tion and retest the up­per slope of its chan­nel at 21 450c/ share. A move above 22 360c/ share would place it in medium-term bullish ter­ri­tory with po­ten­tial gains to 25 540c/share at first, and then to the all-time high at 28 190c/share. Al­ter­na­tively, con­tin­ued down­side through 17 700c/share could see Shoprite top­ple fur­ther to ei­ther the 15 000c/share-level or key sup­port at 12 400c/share. ■ ed­i­to­rial@fin­week.co.za

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