Australia Property Sector

Trading the Property Sector
The property trust has been suffering on the ASX for 2 years now. The historical high was indeed posted on February 23 in 2007 when the price opened at $23.40. Bearish trend started from this point was backed by a support line that was cleared in early February this year. This previous support line has become now the immediate resistance.Let's have a look in details. The long-term support line was indentified through points A, B, C, D and E which are lower lows. On the other side, same thing: points X, Y and Z are lower highs. When the price action cleared the support line in early February, it created a gap (red ellipse on the long-term chart)...

Click to enlargeThis gap was then immediately filled. The rebound failed to break above the support level and validated this level as the new resistance (point F). This level is around $11.5.The price action fell back to post a low at $8.68 last week. The sharp rebound that followed drove the price to $10.70 yesterday. It's a rise of 23% in just 8 days. However the price action yesterday failed to reach the resistance level at $11.50 and closed much lower than the opening price. It may be a signal of short-term trend reversal.

Click to enlargeThe momentum indicators (MACD and technical momentum indicator) are still bullish and argue therefore for a continuation of the current positive trend. However the Bollinger bands show that the price objective targeted by the rebound when it started last week has been reached. It was the upper Bollinger band, that almost corresponds to the resistance line just above.What does this mean? Well it means that after a bounce of more than 20% in just a week for WDC, short-term traders reckon that it's time to sell back the stock. However, it may be an opportunity to re-enter at lower price. That's why we expect that the small correction occurred yesterday is likely to be over as the price fell back to the 20-day moving average (the dashed line between the Bollinger Bands that often acts as an intermediary support/resistance level). A continuation of the rebound is likely and it will probably test the resistance line at $11.50. A break above would give some new momentum and would be clearly bullish.