Trading the Run on REITs

Closing lower for three out of the past four days after rallying to their highest levels since the summer of 2011, real estate investment trusts may have become the most recent target of profit-taking. The iShares Cohen & Steer Realty Majors Index Fund ETF (NYSE: ICF), which includes such major property managers as Simon Property Group (NYSE: SPG), Boston Properties (NYSE: BXP) and AvalonBay Communities (NYSE: AVB) among its holdings, has finished in technically oversold territory for the first time in a month.

And by “month”, I mean exactly a month. Back on January 9th, shares of ICF closed lower for three out of four sessions, with that final session taking the ETF into technically oversold territory above the 200-day moving average. The ETF gained nearly one and a half percent the next day, and was higher by more than two and a half percent five days later. Two weeks later, ICF was still moving up, having gained more than 5% from that oversold close in early January.

What’s contributing to the weakness in ICF? Shares of Boston Properties have closed lower for four consecutive trading days and are set to open technically oversold Friday morning. So far, the stock still has neutral ratings of 6 out of 10, but a positive edge in the short-term of nearly 1%. Also down four in a row ahead of trading on Friday are shares of Avalonbay Communities. AVB has a short-term edge of more than three-quarters of a percent, and a 7 out of 10 rating that puts the stock at the upper end of our “neutral” range.

Other property managers and real estate investment trusts that are experiencing prolonged profit-taking include Equity Residential (NYSE: EQR) and Vornado Realty Trust (NYSE: VNO). Both REITs have pulled back for four consecutive trading days. Of the two, EQR is significantly more oversold in the short-term.

One place where real estate management stocks are still moving up is China, where the E-House China Holdings Limited ADR (NYSE: EJ) has closed higher for three days in a row heading into trading on Friday. EJ has earned “consider avoiding” ratings of 2 out of 10, and has a short-term, negative edge of more than two and a half percent.

Want more stocks? Read our latest from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up”.

David Penn is Editor in Chief of TradingMarkets.com