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Capitaland: More downside?

Wednesday, May 11, 2011

A low volume pullback would suggest that weak holders were selling. A high volume sell down is something else and investors should turn cautious. The volume which accompanied the formation of a long black candle today is the highest since 11 Feb 2011. The bearish tide is very strong.

My purchases made on 12 April at the prices of $3.38 and $3.36, above the 50dMA, are now in the red.  Will I buy more to average down my price? Capitaland's NAV/share is about $3.30. At today's closing price of $3.17, it is trading at a discount to NAV. Fundamentally, Capitaland is a strong company. However, it does not mean that its share price cannot go lower from here.

I have said this before and I will say it again as a reminder to myself: FA is about value and TA is about price.

The reverse head and shoulders did not give rise to a powerful upward surge in share price. The rising price was stopped by the declining 100dMA, trapped for many sessions before finally breaking the support provided by the 50dMA. Any trader worth his salt would have cut loss then. However, I am a bad trader and held on. As price declined, volume seemed to reduce which was heartening. Of course, today's explosive volume as price plunged destroyed that illusion.

All the MAs are declining and the 20dMA seems ready to form a dead cross with the 50dMA. -DI has been rising and, with it, the ADX. The downward movement in price seems to be gathering momentum. Further downside cannot be discounted and if price were to decline further, supports are at $3.11 and $3.08. I will wait for the dust to settle before deciding on my next move.


Chong Jun said...

Hi AK,

apparently, CPL's under both our radar. lol.

Judging from the weekly chart, there are still some room for CPL to fall. I'm thinking of entering the region around 3.0x, but that might seemed dangerous as there is no near term support should the price continue to fall.

Nevertheless, there is a potential bullish divergence setup on the weekly chart and hopefully we can all benefit from it. Of course, taking into account that I wouldn't jump the gun anytime soon. haha.


AK71 said...

Hi CJ,

FA says it is undervalued. TA says price could go lower. A good combination for anyone thinking of a long position. ;)

Yes, not jumping in yet. Waiting for the dust to settle and it would be nice to see some signs of a reversal. :)

Dal said...

Hey Ak,

I was trading Capl for about 3 months as it was undervalued. The property sector as a whole has been cooling. After seeing the pretty steep down trend ever since cooling measures were put in place, I've divested all my holdings at the previous high of 3.4x.

Still quite reluctant to reenter. Just sharing some thoughts, what do you think?

AK71 said...

Hi Dal,

Firstly, congratulations as I assume you must have made some nice gains in your trading activities. :)

What do I think about re-entering on the long side? I think I might add to my position if price should go closer to $3.00 a share.

The decline has been rather rapid and we could see a rebound. Price does not go down a straight line after all.

Of course, waiting for clearer signs of a reversal is always a good idea. :)

mark said...

Looks like CJ lurks here too! :P
Is CJ the CJ I know?

AK71 said...

Hi Mark,

Yes, I think he is the one you introduced Hope Analysis (HA) to. ;)

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