Two Bearish Bets in Real Estate for Traders
One of the most popular indicators for momentum traders is the RSI or
Relative Strength Index. Catch a technical analyst by the tail and ask him or
her to show you some charts and there’s a pretty good chance that the RSI will
be plotted in one of the panels above or below the price chart.
But just because an indicator is popular doesn’t mean that people are using
that indicator in the way that they should. That is because the RSI is just a
tool and like most tools, success lies not in the implement itself but in how
that implement is, well, implemented.
It would be like expecting to have a golf game like Tiger Woods just because
you plopped down $200 for a SasQuatch 460 Driver.
Our research suggests that the RSI, which has been around for decades, is
very often not used by traders in the way that it should be used. In fact, we
discovered that by using a very short-time frame for the RSI, as short as
2-periods, we were able to make the Relative Strength Index into an indicator
that will likely prove much more helpful for traders looking to exploit
short-term moves in the market.
We have developed a TradingMarkets Stock Indicator based around the 2-period
RSI. Specifically, we have found an edge in buying stocks that have a 2-period
RSI below 2 and in selling stocks that have a 2-period RSI above 98. Stocks
with a 2-period RSI above 98 — and that are below their 200-day moving average
— have produced negative returns in both one-day and one-week timeframes.
Click here to learn more about how to trade the 2-period RSI
This Indicator has revealed a number of bearish opportunities that traders
may want to consider in the near-term. Here, I want to focus on two stocks —
both in the Real Estate industry — that may provide opportunities to the
downside for those looking to take advantage of the recent bounce in the market.
Maguire Properties, Inc.
(
MPG |
Quote |
Chart |
News |
PowerRating) has a PowerRatings (for Traders)
rating of 3. MPG is a member of the Real Estate industry, and operates
primarily in the Southern California market. Maguire Properties is the largest
owner and operator of “Class A” office properties in the central business
district of Los Angeles. The stock has climbed by more than 20% in the past
five days, and is currently testing its October highs.
Redwood Trust
(
RWT |
Quote |
Chart |
News |
PowerRating) has a PowerRatings (for Traders) rating of 2.
The company is organized as a REIT, or real estate investment trust, investing
and managing both residential and commercial real estate assets. Redwood
Trust’s primary business is in investing in high-quality residential real estate
loans. RWT is also a company that has spiked higher in recent days, ramping up
from around $25 per share at the beginning of November to a recent intraday
print in excess of $39.
Two Bearish Bets in Real Estate for Traders Recap:
Maguire Properties, Inc. (MPG). PowerRatings (for Traders) rating: 3
Redwood Trust (RWT). PowerRatings (for Traders) rating: 2
David Penn is Senior Editor at TradingMarkets.com