CapitaLand stock recovered 21% in 5 months after I published the technical analysis report.
Meanwhile, the Straits Time Index climbed just 7% within the same period.
Prior to the issuance of the report,CapitaLand stock was still locked in a persistent downtrend channel for more than 3 years.
Even when the upper channel boundary was conquered in August 2012, I was still hesitant about calling for a buy.
The reason was because I noticed a key horizontal price resistance at $3.15 just a short distance away.
As I waited, CapitaLand stock price indeed touched this key obstacle and reversed south for nearly a month thereafter.
However, as the stock rebounded again and neared this key level for the 4th time, I was getting ready for a potential bullish break.
When CapitaLand stock finally conquered this $3.15 level convincingly in the middle of September 2012, I knew that tide has likely changed from a major downtrend into a major uptrend.
That was when I issued the buy call for this stock.
Why a bullish break above $3.15 the best risk to reward moment to buy?
From the perspective of technical analysis, a price resistance will become a support after it has been conquered on the upside.
This means that after CapitaLand stock price broke the $3.15 key obstacle, this level will become a support level moving forward.
If this $3.15 resistance-turned-support holds, it means that this stock is well supported.
There is no reason to sell and you should continue to hold this stock as long as its price appreciate steadily.
However, should this $3.15 level be broken on the downside, it means that the buy call has been invalidated.
You should then sell the stock and take a small loss.
The potential reward is big as the next resistance at $3.50 is quite a distance away.
The potential loss is very small as the support is at just a short distance away.
Isn’t the risk to reward ratio in your favor?
So what happened after CapitaLand stock conquered the $3.15?
Indeed, CapitaLand rebounded off the $3.15 level on numerous occasions after conquering it in the middle of September 2012.
By the middle of October 2012, the buying pressure for CapitaLand stock started building up significantly.
That was when the stock started on a significant price appreciation and did not look back ever since.
At the point of this writing, the stock is still recovering nicely along the uptrending support line that I have illustrated in my technical analysis report.
As long as this uptrending support line is not violated on the downside, investors can continue to hold this stock with confidence.
Can you now better appreciate the beauty of using technical analysis to decide your entry, stop loss and profit-taking level?
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