American Campus Communities: A Back-to-School Short

American Campus Communities (ACC Quote), a real estate investment trust (REIT) that specializes in student housing, appears to be setting up for a short trade.

Shares of this name have been forming a downtrend channel since the beginning of 2007, when the price fell from a high near $32.50. Since the resistance at $32.50 led to lower prices, the stock has been volatile within the downtrend channel.

Each reversal has been producing between $2 and $4 moves in the share price. The latest reversal for this REIT began in July at $24.30, and it has now gone back to $28.60.

The uptrend in shares of American Campus Communities has produced a stronger-than-normal reversal of just over $4. The reversal has now moved back to the downtrend resistance channel, and the downtrend resistance is just under the 200-period moving average.

As the price of this stock has moved back to the technical resistance, volume has declined. The technical picture for this stock shows a lower-volume increase in price -- moving to a downtrend resistance line -- combined with the 200-period moving average just overhead. All of this portends a higher probability of distribution pressure increasing and pushing the stock price back to a former support.

The ideal short setup for this stock would be to see an entry at $28.25, with a stop at $29.25. This is just above the 200-period moving average and offers $1 in risk.

The first profit target would be placed at $27.25 to serve a 1-to-1 reward/risk ratio. Partial profits could be taken there.

The final profit target would be placed at $26. Full profits could be taken there.

If the stock closes under $27 without first offering an entry, this trade setup is no longer valid. Shares closed at $27.72 on Monday.

American Campus Communities (ACC) -- Daily

Update on a Current Pick

Winnebago (WGO Quote) closed under $29.50 last week without offering an entry. This trade setup is no longer valid.