LMIR: Thoughts on partial divestment.

It has been a long time since I looked at the technicals of LMIR. Someone asked me if I would consider adding to my position in the REIT and I explained that I am still unhappy with how the management is losing millions of dollars quarter after quarter due to their foreign exchange forward contracts. So, not adding. Well, not unless price were to decline to provide a distribution yield closer to 10%. Nonetheless, the discourse got me curious enough to look at LMIR's chart.

The first thing that I saw was a negative divergence. As price moved higher, the MACD formed a lower high. In the last lower high on the MACD, price formed a lower high too. This is ominous. We have a potential head and shoulders formation. The neckline of this formation coincides with the rising 200dMA and would approximate 53c in the near future. If price were to break this neckline, we could see price going much lower. How low? 48c is a possibility. That would give me a distribution yield that is attractive enough to increase my investment in the REIT.

Should I sell now? Well, TA is about probability and not certainty. The head and shoulders formation could fail to deliver. However, as the bulk of my investment in LMIR was made in mid 2009 when prices were very depressed, a partial divestment to lock in some gains seems attractive in light of a possible significant decline in price.

Of course, these investments have already benefited from two years of income distributions as well and are likely to continue receiving regular distributions. There is no overarching need for me to partially divest but if I do, what price would be good for a partial divestment?

I would like to sell at resistance and it is obvious to me that immediate resistance is at 55c. However, Lippo is going to buy a big chunk of LMIR units from Mapletree LM Pte. Ltd. at 56c a unit. So, I think price could possibly go to 56c in the open market too. I have put in a sell order at 56c. Read announcement here.

How would things turn out? Only time can tell.

Bridgewater to buy 9% Lippo-Mapletree retail stake for $54.8m
Monday, 23 May 2011

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