Simon Property Hurt By Unpaid Rent, but Stock Has Bottomed

Buy Simon Property on weakness to its five-week modified moving average. Reduce on strength to its quarterly risky level.
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U.S. mall operator Simon Property Group  (SPG) - Get Report has been hurt by unpaid rent from the retailer Gap  (GPS) - Get Report. But the mall operator's stock bottomed on April 2, so the news appears to be priced into the chart patterns.

Retailer Gap suspended rent payments on April 23 due to store closures because of the covid-19 pandemic. 

SPG, the largest American commercial real estate company, has been on the rise since April 2. For more information on this situation read, this analysis on TheStreet.com.

The operator of more than 325 malls opened Thursday at $75.12. It’s down 50% year to date and is deep into bear-market territory 60% below its April 15, 2019, high of $186.24. 

SPG is also in bull-market territory 78% above its April 2 low of $42.25.

The stock of Simon Property is cheap with a p/e multiple of 5.4 and a dividend yield of 13.3%, according to Macrotrends.

The Daily Chart for Simon Property

Daily Chart for Simon Property

Daily Chart for Simon Property

Courtesy of Refinitiv XENITH

Simon Property has been below a death cross since May 21, 2019, when the 50-day simple moving average fell below the 200-day simple moving average. Such a move indicates that lower prices will follow.

The mall operator followed the 50-day SMA lower until extreme volatility began on Feb. 26. This is when the covid-19 pandemic began to close retail stores at malls.

At the low of $42.25 on April 2 the bad news became factored into share-price weakness.

SPG has been above its 50-day SMA since May 22. Today’s high of $76.11 at noon today is the high since the low, which indicates that the Gap news is priced into the chart pattern.

Simon Property fell below its semiannual pivot at $144.21 on Jan. 27. 

Its monthly value level is $54.15, and its quarterly risky level is $128.15.

The Weekly Chart for Simon Property

Weekly Chart for Simon Property

Weekly Chart for Simon Property

Courtesy of Refinitiv XENITH

The weekly chart for Simon Property is positive, with the mall operator above its five-week modified moving average of $64.52.

SPG is well below its 200-week simple moving average, or reversion to the mean, at $160.74. It’s been below this average since the week of April 26, 2019.

The 12x3x3 weekly slow stochastic reading is projected to end this week rising to 23.34 from 14.46 on May 29.

This is a classic buy signal. A weekly close above the five-week MMA with the stochastic reading rising above 20 is a buy signal.

Trading Strategy: Buy Simon Property on weakness to its five-week modified moving average at $64.62 and reduce holdings on strength to its quarterly risky level at $128.15.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the past nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close.

The monthly level for June was established based on the May 29 close.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the past 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.