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ARA: Breaking support. Going lower?

Thursday, September 22, 2011

I have been looking at ARA. The downtrend is persistent and I have yet to initiate a long position here.

Today, ARA's share price broke its previous low of $1.29, gapping down and touching an intra day low of $1.26 before closing at $1.27.


The DIs are negatively placed but the ADX shows that the downtrend is not a strong one. In fact, volume seems to be reducing as price weakens.

If this continues to be the case, the MACD could indeed form a higher low as price forms a lower low. A positive divergence in the works? Perhaps.

If we would like to do a bit of pre-empting, what price would we buy at?


$1.22 is a price that market participants would remember as that was the low of 21 Oct 2010 and the counter went much higher from there in the following months.

Next would be $1.17 which seems like a significant resistance which was tested many times before being overcome convincingly. It should therefore be an important support if tested. If that goes, we could see $1.08 next.

If we believe in trendlines and channels, we will see that ARA's share price seems to be nearing the support of its down channel.


Of course, this support could be compromised like it was earlier in August. However, when it was compromised, it recovered relatively quickly. Could it happen again?

8 comments:

INVS 2.0 said...

Hi Ak71,

Pls tell me more about thew ADX indicator. I totally catch no balls. :/

AK71 said...

Hi INVS 2.0,

Investopedia, my friend. Some things are harder to explain with just words. You would need illustrations as well.

Investopedia is my online shifu and it can be yours too.;)

INVS 2.0 said...

Hi AK71,

My first visit to Investopedia and it's freaking complex. :<

I typed in ADX and found many articles. Are they what I am supposed to read?

eg. http://www.investopedia.com/articles/trading/07/adx-trend-indicator.asp#axzz1Ygzum8ds

:)

AK71 said...

Hi INVS 2.0,

Read as many as you can. It is a free resource and really a treasure, in my opinion. :)

I always start with the Definition and go on to related links.

ADX: Definition.

Daryl said...

Hi AK71,

Do you favour ARA?any reason of it?
it touched 1.20 today.

AK71 said...

Hi Daryl,

I don't know about favouring ARA but its income stream is pretty predictable.

With an expected annual dividend payout of 4.8c per share, we are looking at a dividend yield of about 4% now which is pretty decent for a company which is expected to continue growing.

I am using TA to help me time my entry but, fundamentally, the company is strong with zero debt and strong cashflow. :)

Hwang said...

I took profit at 1.42 after my first purchase, and reentered at 1.35. But no one beats Mr Market.

Licking my wounds for a few days...

I also start Suntec REIT at 1.22 for its 8% dividend. Not sure if it's sustainable as office supply is increasing.

AK71 said...

Hi Hwang,

Yes, no one beats Mr. Market. If we did, it is usually by luck. :)

Well, my newly initiated long position in ARA is also in the red. ;p

As for Suntec REIT, I am not too sanguine about office space rentals and a good percentage of the REIT's assets is offices. I will consider increasing my investment in the REIT if its distribution yield reaches 10%. ;)

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