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CapitaMalls Asia: Another reversal signal.

Saturday, February 26, 2011

Many would remember how the charts spotted reversal signals on Monday and how they failed to be confirmed on Tuesday. When reversal signals fail in a downtrend, the bear is strong indeed. With CapitaMalls Asia, it was no exception as a potential Morning Doji Star setup failed to materialise.

I have not really been looking at the charts since starting my vacation which explains the lack of any charts in my recent blog posts. This morning, I looked at CapitaMalls Asia's chart and we have a reversal signal again. It is a Bullish Harami Cross. Remembering that TA simply gives us hints of what could be and not what would be, let us look at the two possible scenarios.

On Wednesday, I asked "Would I sell my loss making investment in the company? Nope. Why? Because I think the selling could be overdone. Look at the weekly chart and you would see a positive divergence between price and the MFI and RSI."  So, if the reversal signal on the daily chart is confirmed next week, it could be a confirmation of the positive divergence on the weekly chart. This is the more exciting of the two scenarios for long holders, of course.

The $1.83 support would have to be recaptured and if this were to happen, there would be resistance at $1.88 next.  Price could go as high as $2.00 which is where we find the 200dMA but the declining 20wMA on the weekly chart will approximate $1.95 next week. So? We could see price touching $2.00 but pulling back to the 20wMA or $1.95 could be strong enough to prevent price from touching $2.00 at all. So, why am I saying all this? Knowing where the different resistance levels are allows me to decide on where to place my sell orders if the reversal does take place.

If the reversal signal failed once again, price could descend to test $1.70 which is a support level based on sets of Fibo lines I drew some time back on 18 Feb. This is the less exciting scenario for long holders. What would I do then? Wait to see that $1.70 holds up before deciding whether to increase exposure.

Time for breakfast and some sun. Have a great Saturday!

Related post:
CapitaMalls Asia: Morning Doji Star.
CapitaMalls Asia: Suppot at $1.88 gave way.


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