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Cominar REIT charts have been screaming ‘sell’ for months

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Hi Lou,

Love your daily gig on AM 640, particularly the banter with John Oakley in the morning. Most of us need to be reminded on a daily basis that this is indeed a market economy, the best system the planet has ever seen.

To my point, do you have an opinion on Cominar REIT? I own a fair chunk and have seen it fall like a stone since the spring. At this point I am inclined to hold thinking that it is unlikely to fall too much further, but then again, I thought the same thing back in August before it continued its decline for another 15 per cent.

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I understand the concept of calculated risk. I also concede that all decisions are made with the knowledge (sometimes flawed) that was available at the time of decision. At the same time I would welcome your insight.

Jim

Hey Jim,

Thanks for your kind words and the assignment.

Cominar Real Estate Investment Trust controls 493 properties in Quebec, Ontario, Atlantic Canada, and Western Canada. The product mix in the portfolio includes office, retail, and industrial properties. The distributions of the trust yield 8.21 per cent which in the current fixed income environment is very attractive.

An examination of the charts will help you decide how to proceed with this investment.

The three-year chart has some interesting patterns worth investigating. The first is the double top that surfaced in April and May of 2013. A double top is a reversal pattern that indicates that investors are headed to the exits. Also worth mentioning are the sell signals generated by the RSI and the MACD in the same time frame.

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By June the units had breached support along the 50- and 200-day moving averages which is also a bearish signal. Finally a death cross surfaced in July putting another nail in the coffin. What this chart clearly outlines is that there were plenty of opportunities to preserve capital over the last five months.

The six-month chart provides a close-up of the resistance along the 50-day moving average and $18.00. The units are trying to hold onto a thin ledge of support at $17.50. If $17.50 doesn't hold we could see the units retest support at $16.00.

I suppose the lesson to be learned from this case is that your first loss is often your best loss. If you continue to hold these units keep in mind that at this point there are no signals to suggest that we are about to see a reversal of the downtrend. If we start to see some buying come in there will be resistance to overcome at $18.00 and then again at $19.00.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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About the Author
Lou Schizas

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality - and a true believer in the happiness-inspiring powers of capitalism. More

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