Commercial real estate could be the next catalyst for a major market correction….. (according to Bernanke).
Among the key points noted:
1. Commercial market is potentially bigger than the residential market (hence, a much larger problem here)
2. Increased vacancy, declining rents, falling prices. That almost sum up the 3 pillars of real estate. If all of them are still falling, then we have not seen the bottom yet. It is still falling. Companies are still not hiring. More restructuring are going on.
3. Which leads me to the third point. Debt ratio. Essentially, now is the worst time to go ‘long’ on property related stocks (including REITs). Lots of them are highly geared and with falling demand, prices and rents, it is extremely difficult for them to increased revenue. I am not sure how they are going to raise the funds to pay. But, I see a possible repeat of GM, or CIT.
4. At some point in time, the musical chair party will stop. And some will no longer be with us. So, do be careful out there.
City Development has a bearish Tenkan sen – Kijun sen on June 23, the day it gapped down.
While the kumo seems to provide support at around 8.38, a closer look at the Weekly Chart provides a different picture.
1. On the Weekly Chart, it shows that the price is now within a fairly thick kumo and it has failed to breakout of the resistance.
2. On the Daily Chart, a bearish Tenkan sen – Kijun sen cross. Even then, after that, the price rally back but failed to break through the resistance of 8.94 (my cut-loss position). My initial target price was 8.22
3. Today, there is a sell off on City Development on news that the government is looking into imposing a tax on property gains. This news is the perfect catalyst for the bearish move with a very high volume sell off; hitting my initial target easily.
4. City Development closes at 7.88 and may break through the kumo support if there are more sell off. For now, I am looking at a support of 7.78 and 7.60
5. Should it break down from the kumo support further, then my next target price is 7.5, and 7.2
6. Let’s see how long this will go. Will it be the start of a downtrend for the property counters?
