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First REIT: Resistance and supports.

Friday, January 13, 2012

First REIT has been very resilient. It is probably one of the better performers in my portfolio as well. A great investment for income.

However, investing for income does not mean that we cannot trade S-REITs from time to time especially if they remain range bound and somewhat predictable.



In the case of First REIT, if we look at the weekly chart, it is caught between the 50w and the 20w MAs. Immediate resistance is at 77.5c while immediate support is at 76.5c. Breaking immediate resistance could see 79.5c tested next while breaking immediate support could see 74.5c tested.

Now, which way would it go? My take? In the short term, price could go higher. Why?



Looking at the daily chart, we see the MACD just crossing into positive territory while the MFI overcame the 50% line which acted as resistance. The MFI continues to move higher.

However, the formation of a dragonfly doji on a day of relatively high volume suggests that selling pressure at 77c remains formidable. The longer it successfully prevents price from closing higher, the stronger it becomes as resistance.

Why does resistance at 77c seem so strong? It is the confluence of the 50d, 100d and 200d MAs.

6 comments:

INVS 2.0 said...

Hi Ak71,

A question to ask. :) If a stock experiences a rally with constant white candles for the past few days or weeks, then one day there appears a black candle, could this mean a reversal in trend?

AK71 said...

Hi INVS 2.0,

It could signal a possible reversal in trend. We would have to look at other indicators for clues. Also, all signals need confirmation.

Candlesticks charting is very telling but when used alone, it is rather inadequate.

INVS 2.0 said...

Hi Ak71,

I forgot to mention that this stock which I was referring to was AIMS :) I see that the volume is about to get flattened, 200ma and 100ma are going down as well. I think of a possible reversal in trend.

I am relatively new to TA, pardon me if I make mistakes in analzying the chart. :) :)

AK71 said...

Hi INVS 2.0,

TA practitioners who have been doing it longer than I have will tell you that TA will work poorly for AIMS AMP Capital Industrial REIT as its trading volume is generally too low. ;)

Ray said...

In the absence of major FA news, I wld think FirstReit will continue climbing, along with almost all other stocks in the market. But as soon as some bad news come around, all TA can be thrown out of the window so pls proceed with caution :)

AK71 said...

Hi Ray,

Yes, I suspect that the REIT's unit price could creep higher as well especially when we are getting closer to the release of its quarterly results.

Barring any extraordinaries, I expect a DPU of about 1.6c to be declared.

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