Real Estate Investment Trusts (REIT) may not be popular among traders. The stocks don't move a lot; they're not volatile enough to produce material short-term moves. But they do trade in a methodical fashion, which makes REITs appealing for the intermediate- and long-term traders.
The REITs have enjoyed a two year bull market. The Dow Jones Equity REIT Index ($DJR.X) is tracing another multi-year high today. The most recent leg higher in the index came after it broke from a picturesque bullish triangle in early March. Before that bullish triangle breakout, however, the DJR.X generated a vertical count of 172 with its buy signal in January of 2001. It appears that the DJR.X is heading towards that 172 objective.
A weekly view of the DJR.X reinforces the bull market in these stocks. In addition, I've overlaid a retracement bracket with the upper-end of the bracket anchored at the price objective: 172. The bracket fits pretty well with the recent observation at the 19.1 percent retracement level, or the 160 level. The bracket was especially effective in early 2001.
DJR.X - Weekly
I don't know if a trade up to 172 would mark an end to the REIT bull market. But I do think that a print at 172 would offer traders with patience a high probability, low-risk proposition. Unfortunately the options on the DJR.X are extremely illiquid. I could only find one strike offered: June 150s. I think this trade will require more than two months to unfold. I'd feel better with July, August, or September contracts.
I had to look into the components of the DJR.X to find optionable securities, but even there the choices were limited. Of the most liquid components, only seven are optionable. Here's the seven I found:
Equity Office Properties (NYSE:EOP) Plum Creek Timber (NYSE:PCL) Host Marriot (NYSE:HMT) Equity Residential (NYSE:EQR) Duke Realty (NYSE:DRE) New Plan Excel Realty (NYSE:NXL) Public Storage (NYSE:PSA)This list is fairly diverse. For instance, Equity Office, as the name suggests, operates office properties; Host Marriot operates hotels; Plum Creek owns private timberlands; Public Storage operates storage facilities. In one way or another, though, each of these companies are related to the real estate business.
This might be a trade to look into further over the weekend. I don't think that the DJR.X is going to zoom up to its price objective next week, so we have time to do our homework. This is a trade I'll be looking into further next week.