| October 18, 2007
There's also a mention of Healthcare Realty (HR) in this report
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By Karen Talley A Dow Jones Newswires Column
(This article was originally published Wednesday)
NEW YORK (Dow Jones)--Real estate investment trusts have taken a drubbing along with anything housing- or financial- related, but REITS may be starting to bottom out, especially those not involved in the residential field, technical analysts say.
The MSCI U.S. REIT Index, RMS, topped out earlier in the year at 1238.34 on Feb. 8. But then credit issues overwhelmed the group and the index went into pretty much of a freefall until bottoming at 885.28 on Aug. 16, for a nearly 30% drop.
From that low, the index was really able to make headway, retracing a bit more 50% of its loss over the prior six-and-a-half-months.
The retracement was completed during Oct. 5, when the index got as high as 1080.93, a move that also put it above its 200-day moving average of 1068.80, which is viewed as a technical positive.
Even though the index has pulled back over the past few days, to 1012.95, Jim Stanton, a technical analyst at Mt. Vernon Research, remains generally upbeat.
Stanton's prognosis is that the index is "bullish right now" unless it closes below 10007.
The level represents support in the form of an uptrend line from its August lows and just about exactly where its 50-day moving average stands.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, most favors REITs that aren't involved in residential real estate, feeling it's too soon to make a call on the group.
For commercial property REITs, even though they are not the ones in huge flux, underlying commercial property values have fallen as well because of real estate depreciation trends tied to the initial deterioration of the residential sector, Pado said.
But this year's selling of commercial REITs may well be overdone, Pado said.
For instance, Public Storage (PSA), at around $77.85, has seen its share price plunge by nearly 50% since early February when it topped out at $117.16 on Feb. 8.
It bottomed at $68.09 on Aug. 16 and since then has recovered nicely, stair-stepping as high as $85.58 on Oct. 5, before some pulling back.
Pado isn't too concerned about the slide because it appears that in general the stock's volatility has dissipated.
From here, Pado sees shares attempting to get back to the $92 area, a zone they failed to hold in April and one that now serves as resistance.
Healthcare Realty Trust (HR), near $26, has technically met its maximum downside risk, Pado said.
Its chart projected down to a price below $20, a level based on the stock failing to break through a period of consolidation over the past few years.
It reached that $20 level and even went through, to $18 on Aug. 9.
But instead of breaking down further, the follow-up was a strong rally and that makes Pado feel that "we are in the process of forming a new base to build support for the stock."
But don't expect big advances right away. "It will take time to repair damage that has been done," Pado said.
Corporate Office Properties Trust (OFC), at around $41.50, suffered a major decline from its Feb. 8 high of $56.45. The stock dropped 37% to bottom out at $35.21 on July 26.
It has since shown solid strength in its attempt to recover from that decline, and, Oct. 11, got as high as $45.39 to nudge up against its 200-day moving average of $45.50.
This showed there was enough momentum to challenge a key resistance point, Pado said.
After some further backing and filling, he looks for a more successful rally pushing the stock price back above $50.
(Karen Talley covers the large-cap stock market for Dow Jones Newswires and also authors the Abreast of the Market Column for The Wall Street Journal.)
-By Karen Talley, Dow Jones Newswires; 201-938-5106;
karen.talley@dowjones.com
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