Time To Get Bullish On This Real Estate ETF

December 4, 2015 by

real estateRick Pendergraft:  It is rare that you see two different opportunities in two different directions from the same stock, but that is exactly what I see from the iShares U.S. Real Estate ETF (NYSEARCA:IYR). The daily chart suggest that the ETF is heading down, while the weekly chart suggest it’s heading higher.

On the daily chart we see that the IYR struggled at the $76 level, just as it did in August before falling over 10% in a few short weeks. We also see that the ETF just dropped below its 50-day moving average for the second time in the last month.

In mid-November when it closed below the trend line, it was able to bounce back the next day and it was in oversold territory based on the slow stochastic readings. Now we see that the fund is below the trend line and it is just coming out of overbought territory with the stochastic readings making a bearish crossover. This suggest that the move below the 50-day moving average won’t be as short-lived as the last one.

real estate etf daily chart

The weekly chart looks entirely different and points toward the IYR continuing to move higher. We see a trend channel that has guided the fund higher for the last three years. We also see that the 104-week moving average has proven itself as reliable support and it is slightly above the lower rail of the channel.

real estate etf weekly chart

So what does it mean when the two charts are pointing toward two different outcomes? If you are a short-term trader, you can make short-term bearish play on the stock with a target move of 5% to 10%. The leverage of put options would result in a bigger move if the IYR falls like I think it will.

If you are a long-term investor, I would look to buy the IYR on the pullback that the daily chart is suggesting is about to occur. Ideally, you will be able to buy it in the $69 to $71 range, between the 104-week moving average and the lower rail of the channel.

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