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CapitaMalls Asia: Up or down?

Saturday, March 5, 2011

Someone asked me what is the probability of CapitaMalls Asia's share price going higher in the next two weeks? This is a fair question since TA is about probability. I am not saying whether it would go up or not but what is the likelihood of it going up or down. We are still trying to look into the future and it is never an easy task, if possible at all.

Looking at the daily chart from day 1, it is very obvious that CapitaMalls Asia's share price is in a long term downtrend. If we believe in trendlines, then, the very sharp downtrend which the counter is now consolidating within is likely to break. We could continue to see some upward movement towards trendline resistance, the nearest and steepest downtrend resistance line is approximating the declining 20dMA at $1.83 next week. Sounds familiar? Yes, $1.83 is a twice tested support turned resistance. Could be a tough nut to crack.

This is a very steep downtrend and, to be prudent, I might close a portion of my long position at $1.83, recognising the strength of the resistance, if tested. Remember, in a downtrend, selling at resistance is conventional wisdom. Keep the rest of my long position open to see if price could break resistance and head higher. In such a case, the next downtrend resistance approximates the declining 100dMA and that would approximate $1.96 next week.

Any signs from the momentum oscillators? Remember we said that the weekly chart is spotting a positive divergence? Remember how I am keeping an eye on the MACD in the daily chart to see if it could form a higher low? It seems that the MACD is forming a higher low. As price moved lower, seeing a higher low on the MACD is good news for bulls as it suggests a likelihood of a reversal in the downtrend.

What about the weekly chart? We still have a positive divergence between falling price and rising MFI and rising RSI. It is also quite obvious that the immediate resistance to watch is at $1.83. An encouraging sign is found in the formation of a white spinning top which is a probable reversal signal. This would need confirmation next week. All in all, things look pretty benign, technically.

Know where the resistance and supports are, know whether it is an uptrend or downtrend, check the momentum oscillators, act accordingly. It doesn't get any better than this, I suppose. Good luck.

Related post:
CapitaMalls Asia: Consolidating?


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