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Cache Logistics Trust: Retreating to supports.

Sunday, April 1, 2012


Cache Logistics Trust is a favourite of many REIT investors. It has also received many glowing reports from analysts. I also have a small long position in the REIT.

Today, a reader left a comment in my blog asking me if it is a good time to invest in the REIT as it closed at $1 a unit in the last session. Fundamentally, the REIT is a well run entity with 8.4% distribution yield per annum. If one is happy with its numbers, why not? Technically, however, I see possibly further weakness and there could be stronger supports at 98.5c and 97c.


I thought I would share in this blog how I arrived at these numbers.  Quite simply, I looked at the longer term chart, the weekly chart. Daily charts show shorter term price gyrations while weekly charts show possible longer term directions. The MAs on the weekly chart for a trending counter are likely to be stronger supports and resistance, therefore.



Notice how the black candles of the last two weeks formed on the back of increasing volumes? Positive momentum is obviously weakening and further weakness in price would not be surprising.

On the daily chart, the MACD is on the verge of entering negative territory. A return of negative momentum could send unit price lower. The Stochastics is upturning in negative territory. This suggests an oversold situation but if this momentum oscillator should turn up successfully, there could be support and downside could be limited. 98.5c or 97c in the near term? Possibly.



What is interesting to note is how the OBV has been declining which suggests distribution activity has been going on for some time. For sure, it did not happen in a straight line but the trend is clear. This signal suggests that we should exercise caution when initiating long positions. Better to err on the side of caution it would seem.

Related post:
Cache Logistics Trust: 4Q and FY2011 results.

14 comments:

lokster said...

Helloo! Thanks for the post! As I am a newcomer in this dividend field, your comments are valuable and i have started out this blog to chart my dividend path!
http://myfinancialmilestones.blogspot.com

AK71 said...

Hi lokster,

I am happy if my blog and comments have been helpful to you. All the best in your journey towards financial freedom. :)

Ray said...

hi AK,

CLT chart formed a doji (as of now) and a reversal may be in place.
$1.00 may be the lowest in the short term future.

B said...

Definitely keeping out for 97.5-98.5 cents. Good dividend shares

Thanks for the post.

B

AK71 said...

Hi Ray,

Yes, it could be the case although single stick patterns are notoriously unreliable in my experience. Will have to wait for confirmation.

TA is all about probability after all, not certainty. So, what we do after TA has been done would be a function of our risk appetite as well as the accompanying FA, if any.

AK71 said...

Hi B,

Accumulating on weakness is my preferred strategy too. :)

JCK said...

i believe that (i am an noob) that japanese candelsticks normally need confirmations ie single day sticks do not confirm anything.

Aye.
TA is only a guide to probables.

i am flabberghasted at the rise of
AIMSAMPI Reit!

Cant catch the meteor!

AK71 said...

Hi JCK,

I am an experienced noob. ;p

I am rather pleased with AIMS AMP Capital Industrial REIT since it is my second largest investment after Sabana REIT. The REIT had been the subject of many derisive comments, mud slinging almost, since the re-capitalisation of its predecessor, MI-REIT. As I made use of the price weakness in those days to accumulate its units, I found myself being questioned on my decision.

Recently, the negative voices have largely gone silent. The one with the final say is always Mr. Market. :)

Having said this, we should note that AIMS AMP Capital Industrial REIT's trading volume has become rather thin. This could contribute to increased volatility in price.

JCK said...

AK

Thanks for the rather informative comments.

Sometimes in adversities comes the best opportunities for investors.
i have bought in the past, in 2009 to be precise, high yielding stocks at rather cheap prices.
Some are giving out yearly yields of around 14% pa at those purchase prices. Not bad considering.

As for AIMS, i share the same observation that the volumes are rather small.
Does someone know something?
Still trying to catch somemore since i last bought at $1.06!

AK71 said...

Hi JCK,

Indeed, my best buy back then was LMIR at 18.5c a unit for a distribution yield of some 21.6%. There was also First REIT at 42c a unit for a distribution yield of some 17%. Ah, the days of intense negative sentiments.

We should always have a war chest ready for such situations. :)

JCK said...

Aye
Saw that...whatta catch!

we 'should' always have a war chest... :)

On that point, how many % cash do you hold in your investment porfolio?

Say, at normal investment times?

AK71 said...

Hi JCK,

Yup. Might never have chances like those again. Of course, I should never say never. ;)

In uncertain times, 50% cash position is a good idea. If clarity returns or if there are bargains to be had, cash level could reduce.

Usually, I would not be more than 90% invested, whatever the case.

Ray said...

candle sticks have worked well for me so far :)

AK71 said...

Hi Ray,

And I cannot do without them in TA. :)

 
 
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