City Development - Waiting for the Red Candle

After a meteoric rise in its share price, we think CDL may be due for a pull back soon. The recent surge in price is from the low of about $8.00 and after 6 days of price surge, notice the volume is abating as people gradually lose interest in the counter. The recent high of $10.00 acts as its resistance and while there is a chance to trade beyond $10, notice how each time after it rises rapidly, there is almost always a subsequent pull back shortly.

Just hitting a resistance of $10 is inadequate to call for a short. We seek bearish formation in the charts. Traders interested to short CDL, look out for the appearance of the type of candles circled in yellow. We think a relatively strong retracement could take it down by nearly a dollar to about $9.00.

The technical analysis is invalidated if the counter continues to trade above $10.00 with strong volume and/or subsequently forms a consolidation above $10.00.

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