Home > Stock Analysis

REIT Stocks Refuse To Break Down

Posted: Sep 09, 2009 14:42 PM by Joey Fundora

Tickers in this Article: KIM, MAC, VNO, SPG, SRS

The REIT group has been one of the most heavily shorted groups over the past few months. The popular school of thought is that this group will be the next to be hit due to declining real estate values, soaring vacancies and a glut of unfinished properties. Many traders have been directly buying the Ultrashort Real Estate ProShares (NYSE:SRS) ETF, which is a leveraged fund that tracks the inverse of the Dow Jones US Retail Index. It sounds complicated, but basically the fund allows you to make a leveraged bet against real estate investment trusts. While this fund had a spectacular run during the financial crisis, it has been steadily deteriorating for several months. Holders of this fund have been in a world of pain, and it doesn’t look like things will turn around any time soon. The chart below highlights a drop from a high of $295 to the current price under $12, which has probably ruined many retail traders' trading accounts. (For more, see What Are REITs?)

Get Free Stock Analysis By Email

Source: StockCharts.com

Many of the REITs included in the index are above recent bases and are consolidating in a tight range. Simon Property Group (NYSE:SPG), for instance, has been consolidating after a breakout above the $57 area. If you simply remove the name of the stock and disregard its sector, you will have a hard time finding an argument for a bearish case against the price action.

Source: StockCharts.com

Vornado Realty Trust (NYSE:VNO) is another REIT that recently cleared a base and has been consolidating above the breakout area. The 50-day moving average is starting to trend upward, and the stock has managed to hold above its 200-day moving average for several weeks. A move above $60 could be a signal that VNO is entering a new leg higher.

Source: StockCharts.com

Macerich (NYSE:MAC) is also showing a breakout above a base followed by a consolidation. The 50-day moving average has also crossed above the 200-day moving average, more commonly referred to as a golden cross. This is often a sign of bullishness, as it shows a rally strong enough to pull the 50-day moving average higher for more than just a quick short squeeze.

Source: StockCharts.com

Kim Realty Corporation (NYSE:KIM) is one REIT that is still lagging most of its peers. While the chart is not really unhealthy, it has several key differences for the others. First, it hasn’t been able to break clear of the current base. Second, the 50-day moving average is not yet above the 200-day moving average. KIM did recently reclaim its 200-day moving average though, and is in a decent position for attempting a breakout. The level that needs to be watched is the upper end of the recent trading range near $13.

Source: StockCharts.com

Bottom Line
Despite the negative outlook, many of the stocks in the REIT space refuse to give up much ground. As traders, we must often push aside our biases and simply look at the charts. While the longer term time frames are still showing downtrends for this group, the near-term charts are showing strength and there is still a good chance of further upside in these stocks. (For related reading, check out The REIT Way and Basic Valuation OF A Real Estate Investment Trusts.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

By Joey Fundora

Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS