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.
Cache Logistics Trust: 4Q and FY2011 results.