How I Used Technical Analysis To Avoid Downside in Dis-Chem Pharmacies & Fedex Inc

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Just as the ongoing debate rages between whether active or passive is a sound strategy, the tussle also remains between technical analysis & fundamental analysis. Like many market participants, I believe that a combination of the two strategies (among the strategies that exist) could add value when trying to achieve alpha and management risk. One such example is Dis-Chem Pharmacies, where in March 2018 I identified a 'triple top' pattern - this is considered bearish and warns of potential downside risk. At a p/e ratio of 40 times, the share was grossly expensive & could have been used to 'lighten up' on long positions. We then saw the share decline in price by 29% in the following three months. I also used TA to avoid the recent decline in Fedex shares. On 21 September($250) I warned of a 'three falling peaks' pattern. Since then we have seen the price decline sharply (also impacted by weaker results). The price now trades 32% lower at $170. My belief is that TA can be used as a risk management tool & to achieve alpha if you are looking to participate on the downside.



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