American Campus Communities (ACC), 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If the stock closes under $27 without first offering an entry, this trade setup is no longer valid.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) closed under $29.50 last week without offering an entry. This trade setup is no longer valid.

At the time of publication, Schumacher had no positions in stocks mentioned, although holdings can change at any time.

Chris Schumacher is a financial trader, speaker, writer and co-author of Techniques of Tape Reading. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback; click here to send him an email.

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