These REITs Look Techinically Strong

 

These REITs Look Techinically Strong

By Cory Mitchell | August 23, 2017 — 1:00 PM EDT

Real estate investment trusts, or REITs, are a way to add some dividend income to a portfolio, but that doesn’t mean giving up capital gains. The following REITs have been in strong uptrends throughout the year, and recent pullbacks (which look to have ended) may provide an opportunity to get in for another rally.

The most recent rally in AGNC Investment Corp. (AGNC) has been in play since December. The price has pulled back from the June high of $22.34, yet the overall uptrend remains intact. In late July and early August, the price tested the rising trendline near $21. After staying in that region for three weeks, the price pushed higher in mid-August, indicating that the $21 area is still acting as support and that the next moves higher may be under way. Since this is an uptrend, the expectation is that the price will rally above the prior higher of $22.34. Traders could consider a price target near $23 for a swing trade. Longer-term traders may wish to hold the shares longer to take advantage of the dividend, but they should be wary of a decline below $20.75. Based on the $21.55 close on Aug. 22, the dividend yield for AGNC is 10%. (See also: AGNC Investment’s Earnings Surpass Estimates in Q2.)

Technical chart showing AGNC Investment Corp. (AGNC) near a trendline during an uptrend

UDR, Inc. (UDR) has been riding a rising trendline higher since November. July and August have seen the price repeatedly touch the trendline as it edges higher. While the price of a REIT can move quickly, it will often oscillate as UDR done throughout August. Those oscillations, if they continue, could provide an opportunity to get an entry point closer to the trendline between $39 and $38.50. Based on the uptrend, the price is expected to make a new high above $40.71. For swing trading, a target could be near $41.50. Once gain, longer-term traders may wish to hold UDR for longer but should be wary of a decline back below $37.35. UDR’s dividend yield is 3%. (For more, see: UDR Q2 FFO In Line With Expectations, Revenues Increase.)

Technical chart showing United Dominion Realty Trust (UDR) near a trendline in an uptrend

Two Harbors Investment Corp. (TWO) had a rather steep decline in late June and early July, but the price stabilized near support at $9.60. It has since rallied back above $10. A good entry point would be $9.80 to $9.90 if the price pulls back slightly from the $10.17 Aug. 22 close. Traders should be wary of declines below $9.55. Stop-loss orders can be placed just below that level. The swing trade target is $10.75. With a 10% dividend yield, some investors may wish to hold for longer, keeping in mind that the uptrend is drawn into question on a decline below $9.55. (See also: REIT Q2 Earnings: ETFs in Focus.)

Technical chart showing Two Harbors Investment Corp. (TWO) near a trendline in an uptrend

The Bottom Line

These REITs are in strong uptrends and have not shown signs of letting up just yet. All three recently tested a support level or trendline and responded by rallying. This indicates that the pullbacks could be over and that another move up is under way. REITs typically are not huge movers, but the dividend combined with capital gains can produce some solid trades, both for short-term and longer-term traders. Trends change, so if the price drops back below support, traders should consider exiting. Also, it is recommended that traders risk only a small percentage of account capital on any single trade. (For additional reading, check out: 5 Types of REITs and How to Invest in Them.)

Charts courtesy of StockCharts.com. Disclosure: The author does not have positions in the REITs mentioned.

 

Published at Wed, 23 Aug 2017 17:00:00 +0000

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