How To Play Real Estate’s Latest Low By Larry Benedict, editor, Trading With Larry Benedict A couple of weeks ago, we took a close look at the real estate sector. We saw how low interest rates and the Fed’s huge money-printing program had seen the iShares U.S. Real Estate ETF (IYR) double in less than two years. But as we came into 2022, that strong buying momentum evaporated. Instead, rising interest rates saw IYR lose 25% of its value by mid-June. However, on September 14 (red arrow on the chart below), IYR had rallied off its lows before peaking in mid-August. After a brief pullback, it showed promising signs of its rally resuming. But that proved to be a false move. So today, we’ll see what’s in store for this important sector… Recommended Link | Tiny $4 Company to “Steal” Billions From Tesla? A tiny $4 company has developed a new liquid battery that’s sending shockwaves through the energy industry. It’s at the center of a “breakthrough,” says The U.S. Department of Energy, that’s a “totally new approach to battery technology.” Powermag calls it part of the “trillion-dollar holy grail” of battery technology. And Bloomberg says this tech “could eat lithium’s lunch.” That’s because this liquid battery can store energy up to 94% cheaper than the lithium-ion batteries Elon Musk uses in Tesla cars. And yet – unlike Teslas that are known to burst into flames from overheated batteries… This liquid is so safe you could use it to extinguish a burning Tesla. It could be the biggest threat to Elon Musk’s plan to dominate a $130 trillion new energy revolution. And it’s why 5 billionaires are backing the tiny $4 company behind this new battery. |
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New Yearly Lows On the chart below, the 50-day moving average (MA – blue line) shows IYR’s long-term downtrend. It began when IYR peaked at ‘A’ and then made lower highs at ‘B’ and ‘C.’ iShares U.S. Real Estate ETF (IYR) Source: eSignal As you can see, each major move down coincided with two key technical signals: The 10-day MA (red line) broke strongly down through the 50-day MA. The Relative Strength Index (RSI) reversed from overbought territory (upper grey dashed line). However, today I’m going to focus on the action from ‘C’ onwards. After forming an inverse ‘V,’ the RSI broke down through support (green line) before selling momentum waned near oversold territory (lower grey dashed line). This saw IYR retrace and bearishly pull the 10-day MA below the 50-day MA. New Battery up to 94% Cheaper Than a Tesla Battery Initially, IYR rallied off its September 1 low after the RSI formed a ‘V’ and bounced. For this rally to gain traction, the RSI needed to break into and remain in the upper half of its range. But, the RSI ran out of momentum around resistance (red circle) and reversed sharply. Then, the 10-day MA began to accelerate below the 50-day MA at a steep angle. Take another look… iShares U.S. Real Estate ETF (IYR) Source: eSignal Not only has this action driven IYR to new yearly lows – but to its lowest level since November 2020. It’s also put the RSI a long way into oversold territory. With so much momentum against IYR right now, what can we expect from here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
A Countertrend Setup What happens around the RSI is vital to IYR’s next move. Now that it’s far into oversold territory, we can expect mean reversion to generate a countermove against the major downtrend. However, with the stock price falling daily, we must be particularly careful and nimble if we want to catch any move. First, the RSI needs to form a definitive ‘V’ as it did this year in January, February, May, June, and September. Then, it needs to rally toward resistance before we consider entering a long trade. Each time the RSI created this pattern – IYR bounced. And this provided the setup for a potentially profitable long trade. But remember, we must be quick to take any profits as soon as we see them. Because as the chart shows… sentiment and direction can turn in a heartbeat. Regards, Larry Benedict Editor, Trading With Larry Benedict Reader Mailbag In today’s mailbag, new subscribers to One Ticker Trader and The S&P Trader share their first experience with our services… Larry, this was a test run for me. I bought one contract. Normally, I would’ve invested $5,000 and that would have netted me about $600. That would’ve been great! So, we did well. This type of trading fills quickly. It was surprising. I’m used to iron condors and all four have to fill… Sometimes it’s difficult to get in. But I got in and out immediately with QQQ. I sold at $6.43. I think it’s high was $6.50. I’m looking forward to seeing your next alert. Thank you! – Neil C. Hi Larry, I want to thank you for your excellent information in The S&P Trader. I subscribed at the end of your offer and was unable to take advantage of the Quadruple Witching strategy. That’s okay since I’m new to vertical spreads and new to SPX trading… I wanted to be sure I knew what I was doing before I jumped in! I made your trade on September 22, and I’m very happy. I made $550 per contract. I’ve read your information several times, and it’s been extremely helpful. Being conservative, I’m starting out very small as you suggested. Thank you again for your expertise in guiding us through this process. – Carol Y. Thank you as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@opportunistictrader.com. Get Instant Access Click to read these free reports and automatically sign up for daily research. The Ultimate Guide to Taking Back Your Privacy The Trader’s Guide to Technical Analysis The 101 Guide to Pre-IPO Investing |