The real estate industry broke out of a descending wedge, signaling rotation may be in store for this beaten down group. Additionally, phase four (from my book) “the markdown” period appears to be complete. IYR is trading at a 15.215% discount to 52 week highs.
Since institutions are buying, phase one can be assumed to be starting, as we build a base. Phase two, the “mark up” period follows.
If you are a long term investor, this is where you want to start positions. Once the mark up period starts, we look for the 9/20ema to rise with price. Since this is generally the longest phase in the investing cycle, we can anticipate more stocks in this group to setup in the future.
The following two stocks popped up on a scan targeting oversold sectors.
Easterly Government Properties, Inc. (DEA) focuses on the acquisition, development, and management of general services administration commercial properties in the United States. The company is based in Washington, District of Columbia. The company reported earnings on 11/08/16.
DEA is printing a descending pattern, culminating its base recently at the 200ma. Price action is breaking out, with RSI and MACD rising. The latter is above the zero line, signaling bullish momentum should continue. The Kirby opens up above the 19.40 zone on this candidate.
Lexington Corporate Properties Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company acquires, owns, and manages a portfolio of office, industrial, and retail properties net-leased to corporate tenants in the United States. The company reported earnings that exceeded expectations by 3.70% on 11/03/16.
LXP bounced off the 200ma recently as well, breaking out of its descending channel last week. RSI, MACD and STO are rising. Price is above the 9/20ema.
Setups for the Week
The sectors exhibiting rotation, specifically in over sold sectors, IYR, XLP, XLU and XLV, we will look for more candidates in these group, as the week progresses. The leading sectors, IYR, XLF, XLI continue to extend from their moving averages, hence candidates in these industry groups will likely see some profit taking as we start the month of December.
ACIA is showing signs it may break higher soon. Price is above the 9/20ema and both have assumed a bullish crossover. Targets are the top of the Kirby (90.00) with stops below the 9/20ema. Bollinger Bands are tight, suggesting higher prices, as RSI points the way.
OC is one infrastructure stock that is lagging the group. This candidate broke out last week, with RSI rising and MACD firmly above zero line. The Kirby opens up above 54.50, with no overhead supply and fresh 52-week highs in store. This candidate is trading post-EPS on a 10% beat.
Smith AO Corp. is in the industrial sector (XLI), hailing from the building materials industry group. AOS was previously on the IBD50 list, so many will likely miss this continuation of the Wednesday breakout. RSI and MACD are rising.
Other stocks we are watching include:
TSLA,MMM,AMZN,AAPL,ESNT,CATM,ANET,BMY,BJRI,XL,KMI. Remember to check earnings on these candidates before taking new positions.
Check the watch List for more setups and targets for the week.
Happy Monday – Vinny
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