Today was a very big day for retail investors, but really it was just another day for the institutions. TD put out a note today that said the cut was expected and that they expected some selling by retail investors, making this a great buying opportunity, and that is exactly what happened.
The stock traded down 2.1% today, on over 7.7 million shares, over 4 times the average daily volume. Watching the Level 2 screens, the Bid blocks consistently outnumbered the Ask blocks, showing that it was panicked small investors selling into strong institutional hands.
In context of this week, the 2.1% decline was not even the biggest move for the stock this week, as the stock was lower by 3.6% on Monday on no news. So in terms of market movement, it was a nothing-burger.
So what does today's high volume trading mean? It washed out a lot of weak retail hands and bottom feeders fishing for a cheap dividend. The quality of the shareholder base has massively improved, which is a very positive sign for the health of the stock.
From a technical point of view, $17.50 is a very key support/resistance line. Going into today's trading, which side of this line the stock ended on is a major indicator of current sentiment and what is to come, as this has been a key level since March of this year and has been tested many times. The fact that we ended the day well above the $17.50 line and near the high of the day is a very good sign indeed, and the 4x daily volume confirms this.
As mentioned in my post last night, history is on our side. REITs that have managed to weather a dividend cut go on to rally anywhere from 20 to 150% over the medium term. RioCan's NAV is $24.48. If RioCan behaves like a typical REIT, a run towards this level in the medium term would not be a surprising move.
In terms of support, we have many support levels that the stock has earned over the past 9 months. We already know of the resistance overhead at $18. We've breached it before and we will breach it again.
At this point, with the 4x daily volume, the cut has now been fully priced in. Now we're going to move based on the market overall and our peer group performance. If RioCan has additional news, that will be priced in upon announcement.
Overall, considering that many low information small retail investors were calling for up to a 33% drop today, today was a big win for longs and institutions who bought heavily today. Institutions don't buy to get 5, 10 or 20% return, they are looking for much more. The fact that they came in to support the stock today in words and in action amongst a torrent of retail investor selling is great news.
Have a great weekend everyone, and let's see what the futures tell us on Monday morning!