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First REIT: Is the bear just resting?

Monday, March 7, 2011

I scanned the charts of the counters I am vested in and, for the first time in a while, I don't really have anything to say. I was actually thinking of not blogging tonight. However, the last chart I looked at gave rise to some thoughts, some bearish thoughts. The chart was a weekly chart belonging to First REIT.

Let us first look at the daily chart. First REIT is in the grip of a downtrend that started on 20 January. This downtrend is very much intact. In fact, the recovery of its unit price from recent lows with price bouncing off support at 72c as provided by the 100dMA seems to have hit a wall this session as a black candle was formed. The reducing volume as price rose is surely not encouraging.

The MACD although having completed a bullish crossover with the signal line is still in negative territory. The recent price recovery could just be a rebound. Without an increase in volume as price tries to move higher, it could indeed be just that. It might also interest investors to look at the OBV which suggests continual distribution since price peaked in middle of January 2011. This could be short term and mild in nature but we should keep it at the back of our minds nonetheless.

Fundamentally, this is still a very attractive REIT for anyone investing for income. However, it does not look very attractive from a technical perspective at the moment. A pullback to the 100dMA at 72c could happen again and I am not discounting a possible pullback to the 200dMA either which is now at 69.5c.

Look at the weekly chart and the bulls would feel somewhat happier because the longer term uptrend is obviously intact. All the weekly MAs are rising nicely. However, pair this picture with the lower highs and lower lows on the MFI and RSI, we have negative divergences. Not so happy anymore? Well, at the most basic level, it shows that longer term momentum is weak.

Remember this blog post: First REIT: Buying more? Well, the technicals are suggesting caution even in the longer term. The recent pullback to 72c (the 100dMA) could just be a precursor. After all, price goes down a river of hope. Never say never and the 200dMA could be called upon as support in the next flush downwards. You could see me loading more units of First REIT then.

Related post:
First REIT: Buying more?


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