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FSL Trust: A new low.

Wednesday, June 9, 2010

On 7 Jun 10, I mentioned that FSL Trust "closing at 45c is below the trendline support in the short term. Could we be seeing the start of a bottoming process with 42.5c as the base and 46c as the neckline? Could we be seeing the start of a trading range with support at 42.5c and resistance at 46c? Although the MACD is above the signal line, it remains in negative territory. The MFI has peeked above 50% and the OBV is flattish. Selling pressure has abated. That much is obvious."

Then, news that Verona I, seized in Japan by Singapore-based Daxin Petroleum for not paying for bunker supplied by Daxin had muted response from market participants. Today, news that the other vessel, Nika I, also returned by Groda Shipping is arrested in Qingdao, China, by Daxin over the same reason sent FSL Trust's unit price plunging.

Fundamentally, I priced in a worst case scenario of a loss of 15% income as well as a 33% reduction in dpu from 1.5 USc per quarter to 1.0 USc per quarter.  Technically, it looked as if FSL Trust was bottoming and I bought some units as a hedge.  My recent purchases here demonstrate the danger of anticipation using TA rather than wait for firmer signs of bottoming or a trend reversal.

Now, the question is what would I do from here? Buy more? No, technicals are very bearish. Could it go lower? It might.  Sell and cut losses? No, not now when its price is forming a new low.

FSL Trust's unit price hit a historic low of 32c in March 2009 and at today's low of 39c, the price is only 7c away from testing that low. It seems to me that a test of 32c as support would be overly pessimistic and if it should come to that, I would probably buy in again.

Related post:
FSL Trust: Time to buy?


la papillion said...

Hi AK,

Shit happens...

If it comes down to 0.325, I'll also take a look at it. I wish for your sake and unicorn (my dear fren) that it'll not come to that.

Suggestion: bath in flower water :)

AK71 said...

Hi LP,

As you know, at 60c and higher, I was advising people against FSL Trust. However, as its price plunged, I began to see value. Now, on hindsight, I was too early in my hedges but I guess that's why they are hedges. ;)

With the high volume sell down seen today, I would wait and see if price continues to decline and if the historic low of 32c would be tested.

Looking at the daily chart, we can't really see it but if we look at the weekly chart, we will see that the OBV shows distribution to be fast approaching the level seen post Lehman Brothers' collapse. MFI on the weekly chart has yet to enter oversold territory. I am holding my horses and will see how things unfold before making my next move.

I look forward to the flowers for my bathwater. Thanks! ;-)

Drizzt said...

i really dunno about this. the understanding of its business is that it might not stand it but contraian tells me its worth a punt.

AK71 said...

Hi Drizzt,

When pessimism becomes extreme, there is always a good chance that selling gets overdone. The slightest bit of good news might send price rebounding in such an instance. So, I do share your sentiments. :)

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