NWRE

[DJF]

stockcharts.com/gallery?NWRE

DD as always,
DJF

[Chart]

Curious how you weigh the size of the three recent black candles with the below average volume on which they occured?

Do you just not make an opinion and wait to see what happens when/IF we get to $9.20?

Also, the reversal that occured a few days ago around the $10.80 range which was a prior resistence level. Any significance to the long black candle at that level and/or the fact it was on low volume? (ie ... low volume suggest anything?, long black more significant?)

Appreciate comments.

[DJF]

NWRE has been killed over the last 5-6 months, and there was little evidence to suggest a reversal until the stock capitulated in January 2004. Since then, it has meandered in a slight downward bias as the overall market sold off.

There appears to be value around $9.20-$9.50. What happens here will decide what form the turnaround will take. Will we see a steady advance to $13.50 on rising volume, or a scrappy rally to $12 before falling back.

The last 3 days of candlesticks look bad, but relative to what has happened in the overall market (and note - near term lows have not been breached, unlike the NASDAQ or NASDAQ 100), it looks relatively good. The low volume represents retail sellers, not institutional selling - it could be argued that the 3 days of selling has trapped last weeks bulls, but NWRE can rally to $10.80-$11.00 on relatively low volume. The gap breakdown from c$13.50 will not be a resistance level once $11.90 is breached. So we have a decent play from $9.50 to $13.50 with supply/resistance between $10.80-$11.90.

"Do you just not make an opinion and wait to see what happens when/IF we get to $9.20?"

Everything said is just an opinion - no one really knows what is going to happen. I am basing this on prior price action. If there was a sell off on 2 million volume that cut below $9.20 then all I said above would be irrelevant.

If I was to formulate a play it would be to take a small position here, and place GTC buy orders at $9.51, $9.41, $9.31, and $9.21 with a stop on a loss of $9.20. Depending on your risk:reward bias would decide what proportion of your total order you would place at each GTC level (low risk would mean a bigger allotment at $9.31 and/or $9.21).

JMO,
DD as always,
DJF

[Chip]

Declan, thanks for the invite. I refer to your page at stockcharts now and then. I'm not a TA guy, but am interested in learning. I was lucky enough to buy NWRE in 99 for $1 and sell in 02 for 20, so I got a taste of what can be. I've been trying to time it since $20 and its gotten the best of me so far. Hope to leann about some new opportunities on this site.

[taxevader1999]

A few questions:

1. One of your charts on NWRE showed a text box that said "Bull Phase" beginning on March 8 (I believe). Would you mind commenting on how you define a bull and bear phase and how you determine the start?

2. Your commentary today says set stops below the inverted hammer of today. Why at this point and not below $9.20? With a fairly thinly traded small cap stock don't you think you need to give it a bit more room?

Thanks

[DJF]

The "Bull phase", "Bear phase" reflects the direction of price and technicals. I have labelled NWRE from a "Bull phase" for Mar 8th to a "Bear phase" for Mar 11th - this is actually wrong - it should still be a "Bull phase" for the reasons outlined below. A "Bull" or "Bear" phase doesn't mean that one should buy off the turn to "Bull phase" or sell the "Bear phase", but that one should look to trade the direction; long if Bull phase = buy dips, short if bear phase = sell bounces. The definition of each phase is

[1] MACD positive cross for 'Bull phase', negative cross for 'Bear phase' --- This is first error for NWRE's current "Bear phase" as this hasn't happened --
[2] Slow stochs [39,1] above 50 for a 'Bull phase' and below 50 for a 'Bear phase'
[3] Price close above 20-day SMA (mid-BB band) for 'Bull phase', below 20-day SMA (mid-BB band) for 'Bear phase'
[4] OBV above 20-MA for 'Bull phase', below 20-MA for 'Bear phase' --- This is the second error for NWRE's current "Bear phase" as the OBV has not crossed below the 20-day SMA

When each of these conditions are met from [1] to [4] there is a switch one way or the other.

Okay - the switch to Bull (or Bear) phase does not give you a good buy (or sell) price. One could take an entry on the turn to "Bull phase" or "Bear phase" - but often prices are too extended in the direction that triggered the phase switch. In the case of NWRE, the "Bull phase" triggered when prices were above $10.00 - not a great entry as there hadn't been a retest of $9.20 lows. However, had prices continued to rise to $11.80 it would have been highly unlikely that a pullback (from $11.80) would have dipped below $10.00. So those wanting part of the action could have bought 30-40% of their allotment at the switch from Bear to Bull. The remainder of the fill could be done using the following methods.

When a new phase is triggered, draw (or calculate) fib retracements from the near term low (if a switch to a bull phase) to the high (vice versa for a switch to a bear phase) of the candlestick that caused the phase switch. Place a GTC orders on the 38%, 50% and 62% retracement lines (each for 20% of the total allotment). Stops for the entire position are placed beyond the 75% retracement level.

Alternatively (or additionally) - look for candlestick patterns that suggest a pullback is complete (for a new Bull phase). These include "hammer", "bullish harami", "bullish piercing pattern", "morning star", and "dojis". When one of these patterns flash - buy a break of the high of the formation (or take an aggressive position and buy the next days open). Combined with fibonacci retracements it gives you added security. Stops go on a loss in the lows of these formations.

So, in NWRE case, we had a "doji" yesterday following a pullback inside retracements from a new "Bull phase". This was a "buy" from the above system. Stops go on a loss of the doji lows - limiting your risk. One could give the trade more room and place stops on a loss of the last near term low prior to the "Bull phase", in this case $9.20. In some cases (but not here), this price might leave too great a risk.

The important point you raise is the importance of doing your DD. I errored on the switch to the "Bear phase" - this can happen - I make mistakes. Although I did recommend a buy off yesterday's doji - which fits in the above scenario. Given todays action we have a "spinning top" - which is a neutral candlestick - bulls and bears are fighting it out. Some may move stops to todays lows should the bears win. Others may want to stick to a loss of $9.20 before selling. It all depends on your risk tolerance and what you are looking for in a price target (eg $11.80, $13.50 or beyond).

Hope this helps,
DJF

[taxevader1999]

A clarifying question:

On the MACD crossover.... are you referring to a cross above/below the trigger line or a cross above/below the 0 line?

[DJF]

I was using the histogram 0 line as the signal, but I have changed that to a crossover in the trigger line. The histogram will be more sensitive - but crossovers will occur more frequently. The trigger line would be better for intermediate to long term holds.

DJF

[taxevader1999]

Chart seems to improving going into "pre-announcement" season for NWRE.

Is this a forecast of things to come or just pure speculation? I guess we may know in the next few days.


If we do get a pre-announcement I am not expecting it tomorrow. I think it would be more like Friday, based on the previous announcements.

The Yahoo NWRE board is useless. Would be interested in hearing anyone's comments on NWRE (technical, fundamental, whatever)

[DJF]

There is definite improvement here. The long term picture looks to have completed its declines at $9.00. So if buying with a 12-month picture+ then I think you have a safe entry price here. (Stops on loss of $9.00).

Having said that, the short term picture looks a little bearish. There is a neat rising (bearish) channel, that if it breaks - could send prices back to test $9.15. If you wanted to catch this (say for the long term) - GTC orders down around $9.25 should suffice (but no guarntees on getting filled). A close of the breakdown gap is your price target to assess risk:reward (short term). Long term, look for $20+.

I don't follow NWRE fundamentally, so I can't say Aye or Nay as to what may come. Conservative buyers would likely wait for a break of $10.85 before buying (stops 5-8% off this price). It depends on your risk tolerance and if you would be prepared to hold through weakness. The overall market looks close to completing its correction.

Secondary indicators are working to a new bull rally - but Friday's job figures might put a temporary dent into when this rally might start. If Friday's figures are good - then a cue for the start of the rally will be triggered. If poor, it could be another 2-3 weeks before the secondary indicators confirm the next rally.

DD as always,
DJF

[taxevader1999]

Would you mind clarifying the "rising bearish channel", I not sure I see the same thing.

Also, did today's action break the channel?

I do see a resistence line across the high of the candle on Jan 5th, Jan 28th, and Mar 8th.

The stock closed above the resistence line.... might it now act as support?

[DJF]

The rising bear channel is a trendline drawn along the lows of the March rally from $9.13 - and a second trendline, parrallel to this, attached to the highs of the red candlestick of the $9.13 lows. Trail your stops below the lower line.

I have marked the trendline on my stockchart list. Today was not a breakout from the channel line. But it is very close to a break of (more important) resistance at $10.85.

[DJF]

Use todays set up to buy the retest of $10.85. Technicals continue to strengthen.

stockcharts.com/gallery?nwre

DD as always,
DJF

[taxevader1999]

Not sure I either agree or understand you comments today on Stockcharts.

It looks to me like we have a fairly well defined pennant formation. From the trend lines across the highs and the horizontal line across the near term lows, it looks to me like the pennant is still in place.

Further, after a four day or so pullback on lighter volume, today's doji looks to me like its suggesting a loss of downside momementum from the past several days.

Wouldn't a move up the downward sloping trendline across the tops (on volume) signal a breakout? Likewise a breakout below the lows of the horizontal trendline would also signal a breakout.

[DJF]

If you determine a pennant to be a rising support line and a declining resistance line - then the doji fell outside this. If you consider a pennant to be a small triangle (in this case, a mini-descending triangle), then we still have a pennant play (what has changed is support - as you say, resistance remains as it did before - buying a break of doji highs would coincide with an upside break of resistance). You are right that it can break both ways, up or down. The trend is up, so this should break in the direction of the trend - hence an upward bias. If you buy the pennant, or are holding a position off the lows - then selling a downside break will lock in profits, and potentially provide an opportunity to buy back these shares at a lower price. Technically, NWRE looks very good. Todays action looks to be within a redrawn pennant. Yes - NWRE is still in a consolidation.

Hope this helps,
DD as always
DJF