MR PRICE GROUP LTDShort
Mr Price Group - Retail Shares Remain At Risk
Updated
Have you been to your local mall this holiday period? Me? Not that much, so I am looking to the charts to try and determine whether or not South African retailers are going to report good results or whether the weak local and global backdrop will have an influence on trading conditions.
Last week I posted about TFG looking vulnerable on a medium to long term basis and today I am looking at Mr Price Group. To be fair management have navigate the local retail landscape with confidence and when the ball has been dropped, quick measures to correct missteps have been taken. That being said, a 20 price-to-earnings ratio reflects somewhat high expectations and combining that with the bear flag formation, the chart may be warning investors and traders of a technical breakdown.
Since September 2018 we have seen the incline support being held however a break and close below this level could trigger further selling. Using a technical measurement, R190 comes into play over the long term.
Definition:
A Bear Flag is a price action within the context of a downtrend that produces an orderly price increase consisting of a narrow trend range comprised of higher swing/pivot highs and higher swing/pivot lows.
Background:
The success of a Bear Flag can be greater after a significant downside move due to the possible increase of overhead resistance.
Bear Flags can be stronger when the swing low that begins the pattern is also an all time low due to the possible lack of underlying support.
Practical Use:
Traders interested in gaining additional confirmation by watching the sentiment read of a chart, will often seek out Bear Flag patterns due to their ability to "prove" the lack of buying interest during the timeframe in question.
Last week I posted about TFG looking vulnerable on a medium to long term basis and today I am looking at Mr Price Group. To be fair management have navigate the local retail landscape with confidence and when the ball has been dropped, quick measures to correct missteps have been taken. That being said, a 20 price-to-earnings ratio reflects somewhat high expectations and combining that with the bear flag formation, the chart may be warning investors and traders of a technical breakdown.
Since September 2018 we have seen the incline support being held however a break and close below this level could trigger further selling. Using a technical measurement, R190 comes into play over the long term.
Definition:
A Bear Flag is a price action within the context of a downtrend that produces an orderly price increase consisting of a narrow trend range comprised of higher swing/pivot highs and higher swing/pivot lows.
Background:
The success of a Bear Flag can be greater after a significant downside move due to the possible increase of overhead resistance.
Bear Flags can be stronger when the swing low that begins the pattern is also an all time low due to the possible lack of underlying support.
Practical Use:
Traders interested in gaining additional confirmation by watching the sentiment read of a chart, will often seek out Bear Flag patterns due to their ability to "prove" the lack of buying interest during the timeframe in question.
Note
22 August 2019 Update: Mr Price out with a trading update for the first four months of the year where it recorded growth in retail sales and other income of 1.1% to R7.5bn, group retail sales of +0.6%, with comparable stores sales of -2.5%. The last 17 months I have been bearish on the SA retailers, with short ideas, reflected in previous research:
MSM at 173.50 (now 43)
MRP at 286 (now 175)
SHP at 255 (now 125)
MRP continues to be weak and I would be quite surprised if the share doesn't take a sizeable knock today. On the chart we have a bear flag which extends to around the 150/147 level while the 50-day and 200-day moving averages continue to trend lower.
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