Hi Midas3,You can do a risk/reward analysis by using a ratio to...

Hi Midas3,
You can do a risk/reward analysis by using a ratio to compare the expected returns of an investment to the amount of risk undertaken to capture these returns. This ratio is calculated mathematically by dividing the amount of profit the trader expects to have made when the position is closed (i.e. the reward) by the amount he or she stands to lose if price moves in the unexpected direction (i.e. the risk).

As you can see, the whole process is subjective as it depends on the trader's expectations. In this particular instance, i am willing to risk 10% of my money to make an expected return of 20% in the coming few weeks so i have 2:1 risk/reward ratio on that particular trade.

Personally, i use the following criteria to evaluate a REIT: Debt ratio (gearing), cap rate, Distribution yield, Occupancy rate and NTA. Australands fundamentals have clearly improved over the past six months. However, its security price has barely budgeted since the announcement of financial result in July 2009.

I think the recent SP movements is due to irrational panic, many traders follow the charts blindly and believe that it helps them to predict the future!!! (i believe that charts are good in predicting history only lol), and some analysts who described ALZ as under performing such as this one!
http://www.legalsuper.com.au/files/asx200/snapshots//ALZ.pdf

IMO, shares that have been descirbed as under performing based on their results six months ago (including ALZ and FKP)will out perform other REITs and analysts expecations due to their business structer (The cyclical residential development business which offers more volatile income but greater growth potential during recovery). High risk = High return.

The results will be announced on tuesday, if its worse than expected, i dont see the share price losing much value as its already trading at a very cheap price. However, if the results are better than expected, i expect ALZ to be trading around 60c in the coming few weeks.