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The long awaited technical rebound.

Tuesday, June 21, 2011

I keep saying that downtrends are rivers of hope and that prices do not go down in a straight line. This is quite natural but in despair and desperation, it is all too easy to give up and throw in the towel. This is capitulation.

Capitaland and CapitaMalls Asia are both in downtrends. This is quite obvious. With no signs of reversals to the upside, I recently added to my long positions with the simple believe that they are very oversold and technical indicators were prime for a technical rebound.

Of course, there was no way to know if or when the technical rebound was going to take place. However, the feeling was that any further downside could be limited in case a rebound did not take place anyway.

Now that the rebound has happened, it is important not to become delusional to think that prices could continue going up to hit the old highs. With the downtrend intact, the thing to do is to sell if resistance levels are tested. The question is at what price levels do we sell at? Well, my way is to search out the resistance levels and I see $2.91 and $2.94 for Capitaland.


Wait a minute, do I not think the share price could go higher to test resistance provided by the trendline which is approximating $3.20? Well, it could, of course, but that is a long shot and, bearing in mind that I added to my long position recognising the strong downtrend the counter is in, the thing to do is to lock in gains and to reduce exposure.

What about CapitaMalls Asia? Well, I am still hopeful that its share price could do a gap cover at $1.55. However, I also recognise that we could find resistance at $1.50 to be quite significant.


Therefore, locking in gains at $1.50 would be a good idea if it were to be tested. Let's see how things turn out tomorrow.

Related posts:
Capitaland: Average buy price of $2.81.
CapitaMalls Asia: Bought at $1.37.






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28 comments:

Chong Jun said...

Hey AK,

morning star doji spotted for CMA. Hopefully its good news for people who are vested. :)

LK78 said...

Dear AK,

Am an avid reader of your blog. Am trying to learn the way you do TA. How did you managed to come up with the resistance for CapLd and CapMallasia? Thank you.

Is there any site or book you would recommend me? Thank you. :)

Rgds,
LK78

AK71 said...

Hi CJ,

Yup, I saw that too. Keeping fingers crossed. ;)

AK71 said...

Hi LK78,

Resistance and supports can be identified using candlesticks. I also use moving averages. :)

A free online resource which is very good is Investopedia. If you want some books, the Dummies series are very readable and easy to start with.

Have fun picking up TA. ;)

la papillion said...

Hi AK,

Actually what is meant by technical rebound? What other kinds of rebound could there be?

For these two counters, I think that to break the current downtrend, there needs to be another shakedown - possibly going lower than the previous low - before it can begin its gentle recovery. We can see it more clearly as it plays out but there's no way I would think that everything is going to be all bright and sunny from here on.

Gd luck to all shareholders!

mark said...

Till now I don't really know what you mean by a river of hope. LOL. My first impression is hope being drained in one straight line... start to finish.

Just decided to pose this back to you today after procrastinating for a year.

AK71 said...

Hi LP,

It is just so prevalent in the literature that we sometimes use words and phrases without really questioning. So, you have asked a good question.

From the perspective of grammar, "rebound" is a noun and "technical" is an adjective which gives us more information about the noun. If we feel that the adjective is redundant, I guess we could drop it. ;)

I agree with your analysis and I am keeping an eye on things. Lower low in price and higher low in the MACD: positive divergence. Time will tell. :)

AK71 said...

Hi Mark,

A year? That's too long, bro.

Share prices climb a wall of worries and go down a river of hope. It means that prices do not go up or down in a straight line.

As prices go up, there would be occasional worries which would send them lower but the overall direction is still up. As prices go down, there would be occasional hopeful sentiments which would send them higher but the overall direction is still down.

I hope my explanation is clear (pun unintended). ;)

Hubert wee said...

Hi AK, have u divested NOL or are u still holding ?

AK71 said...

Hi Hubert,

This "No Ordinary Laggard" as coined by you has been extraordinary in underperforming the market. ;)

I am not adding to my long position but neither am I cutting loss. I will only divest if price should test resistance in a downtrend.

Of course, price could go lower and I will wait for the technicals to turn positive before taking further action. :)

ortho said...

Hi AK71
Do you tink the current price is a good buy?

AK71 said...

Hi ortho,

Both counters are trading at a discount to NAV. So, they are undervalued.

Technically, however, their downtrends are intact. It suggests that prices could weaken further.

So, if you feel that current prices are cheap and want to buy some, don't throw in the kitchen sink. Keep some powder dry. ;)

Touzi said...

"Both counters are trading at a discount to NAV. So, they are undervalued. "

According to Capitaland AR, evaluation of the property are carried out once every 3 years or less. So what is undervalued based on current valuation, may not be so during the next round of valuation. So how does one value a property company?

AK71 said...

Hi Touzi,

How do we value a property company? I have come across many approaches, reading reports by professional analysts. There are people out there more qualified to answer this question. So, I will skip it. ;)

As for CPL, I was just sharing with some friends earlier today that its exposure to residential real estate in China and Singapore makes up about 20% of its assets. In an extreme and unlikely scenario in which these assets go to zero value, CPL would still have a NAV/share of >$2.60. A bit simplistic? It helps to put things in perspective for me. ;)

Musicwhiz said...

It is not easy to properly value a property company. Land banks and asset valuation are starting points, but it's too complex and "lumpy" for me.

Hence, I avoid property stocks.

Cheers,
Musicwhiz

AK71 said...

Hi MW,

Thanks for sharing your views. :)

mark said...

Wall of worries and river of hope. Are those coined by you?

LP - tech rebound.. i was surprised u ask that. But a good question. A tech rebound to me can also mean a dead cat bounce (pls dont ask me how it came about). Bargain hunting, short covering, etc. This rebound may not be rebounding off a meaningful support, but its meant to test a support turn resistance. Seen from a tech chart. The usual rebound usually follows a retracement to a support and a bounce off that support.

Maybe we should pose the question to Jay :P

AK71 said...

Hi Mark,

No, not coined by me. I have come across them many times in past readings both online and offline. I find them to be very apt and poetic as well. ;)

la papillion said...

Hi Mark,

Haha, I heard of that term technical rebound so many times, but never asked what it means and since AK is using it, I simply took the opportunity to ask him :) From the context in which it is used, I gathered that it is used when the rebound is not genuine. For example, during a downtrend, the price don't go down in a straight line, so the smaller upward movement in a broader downward movement is the technical rebound. The reverse is true for uptrend too - though I don't know if there's a name for it.

I simply use retracement in all cases of such movement, whether it's the price moving down in an uptrend or the price moving up in a downtrend.

I've got another question for you - what's meaningful support? :)

mark said...

I am getting queried like an auditee. -|

Meaningful support - a cluster of MAs, or many times tested low, and/or fibo magic support.

Good interpretation from your end. Dead cat bounces are tech rebounds, but supposedly primed to form a lower low. ie, break of the previous low before it did a tech rebound. But if there is bullish divergence, shortists should take heed and be nimble while longists can do some bargain hunting. But if bullish divergence fails, then bo bian liao.

Anyway I have been too bz at work and I have since scaled back on trading.

Anonymous said...

Dear AK,

This time round Mr Market is making me giddy. Up down, down up, never straight forward :(

I realized that it doesn't matter anymore, it really depends on what type of shares we are holding. Some us are holding resilient shares that move very little downwards despite the volatility. Some of us are holding shares that hardly budge even though the market is moving up.

Of course generally, all shares move downward during a BIG crash.

Still giddy . . .

KM

AK71 said...

Hi KM,

Reading your comment made me smile. Haha.. Yes, a giddy roller coaster ride it is.

I am fortunate that most of my portfolio has, in fact, appreciated a little bit in price. Good luck in the coming weeks. :)

Anonymous said...

Hello AK,

Just booked more flights through your Zuji website yesterday.

Hope to add on to your smile : )

Thank you & Good Luck to all !

KM

AK71 said...

Hi KM,

Wow! You travel a lot. Thank you so much for your kind support of my ZUJI banners. I appreciate it very much. :)

Good luck to us all. :)

Anonymous said...

Hi Ak,

Woukd you take a look at stxosv and give your comment. Thank you

AK71 said...

Hi Anonymous,

Analysis of any company is likely to be very time consuming and I only do it for companies I have an interest in. So, I will have to decline.

Could you include your name or initials in future comments? Thanks. :)

la papillion said...

Hi AK,

Can you give me your valued comments on digiland please? I'm lazy to do it hence I asked you to do it, even though I can search online for the information and probably do a chart up for it but I still prefer someone to run through it so that I can save my time while wasting yours?

I just like to be spoonfed, sorry about that. Please?

AK71 said...

Hi LP,

Er...

-.-"

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