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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.
Tuesday, 21 June 2011
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