5 REITs Sending Buy Signals in March

BALTIMORE ( Stockpickr) -- How's your real estate portfolio been faring?

The last few years have been a stellar time to own real estate investment trusts, better known as REITs. But this may just be the beginning of good times for REIT investors.

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While the S&P 500 has staged impressive performance in the last year, rallying more than 13.5% in the trailing 12 months, REITs have managed to even overshadow those gains; as a group, REITs have climbed a full 21.9% in that last year. From a relative strength standpoint, that's a very auspicious sign for the rest of 2013.

Better yet, with traditionally high dividend payouts, REITs offer an extra shot in the arm for investment returns. That helps this class of stocks avoid more downside than the real estate market in general.

As you might expect, most REITs have been climbing higher of late. But some are looking more bullish than others -- we're taking a closer technical look at five of them today.

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For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

So, without further ado, let's take a look at five technical setups worth trading now.

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Retail Properties of America

Up first is Retail Properties of America ( RPAI), a mid-cap REIT that owns and operates retail shopping centers in 35 states. RPAI has been on a tear year-to-date, climbing more than 24% while the S&P has moved 9% higher over the same period. Sure, the S&P's gains are certainly impressive, but RPAI has been on fire.

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One of the most significant things about RPAI's recent price action is that it's gone parabolic in the last few months. Fast parabolic price moves aren't sustainable for long, and that's exactly what we're seeing in Retail Properties of America right now. Shares have been consolidating sideways since the start of March, but that's not necessarily a bad thing. RPAI has been moving sideways in a pennant pattern, a short-term trading pattern that generally signals a continuation of the prior trend.

And in RPAI's case, that prior trend was very bullish.

In short, the pennant is a chance for this stock to bleed off some overbought momentum after such a swift move upwards. The buy signal comes when shares push up through the top of the pennant. We could see that happen this week.

General Growth Properties

There's nothing short-term about the pattern that's been setting up in shares of General Growth Properties ( GGP). The $19 billion mall owner has been forming a bullish ascending triangle pattern for the last seven months, but it's only just getting close to making a significant move in March.

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GGP's ascending triangle is formed by a horizontal resistance range above shares (from $20.50 to $21) and uptrending support below shares. Essentially, as GGP bounces between those two big technical levels, it's getting squeezed closer and closer to a breakout above resistance. When that breakout happens, we've got a buy signal for shares.

The fact that GGP's resistance zone is a range rather than a single price does complicate things a bit; shares have previously moved up to $21 a couple of times without actually triggering the pattern. The best way to trade this stock is by your risk level. Traders looking for a higher risk/reward setup should look to buy on a move through $20.50, while more risk-averse investors should hold out for a close above $21 to buy.

Either way to trade this stock, I'd recommend keeping a protective stop at the 200-day moving average.

Host Hotels & Resorts

Host Hotels & Resorts ( HST) is threatening a breakout of its own this week. The $12.5 billion hotelier owns 121 upscale hotels spread across the world -- but the real draw is this REIT's price chart.

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Right now, HST is forming a rectangle pattern, a consolidation setup that's bounded by horizontal resistance above shares at $17.25 and horizontal support below shares at $16.50. The rectangle pattern is a lot like the pennant pattern in RPAI; it gives shares a chance to bleed off some overbought momentum after a big move higher. Resistance at $17.25 is a price level that's acted as a ceiling for shares well before the rectangle started forming, and that fact makes a breakout through resistance all the more significant.

With shares testing that level this week, we could see a buy signal sooner rather than later: if shares hold above $17.25 today, it makes sense to take a position in this stock.

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles, rectangles, and other pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

Resistance at $17.25 is a price where there's an excess of supply of shares; in other words, it's a place where sellers have been more eager to take recent gains and sell their shares than buyers have been to buy. That's what makes the breakout above $17.25 so significant -- it indicates that buyers are finally strong enough to absorb all of the excess supply above that price level. That's when you want to own shares.

Pennsylvania REIT

Philadelphia-based shopping center owner Pennsylvania REIT ( PEI) is forming a very different setup right now, and you don't need to be an expert technical analyst to figure out what's going on in shares of this billion-dollar commercial landlord. PEI is currently forming an uptrending channel, a trading range that's bounded by a trendline resistance and trendline support level.

Those support and resistance levels give us a high probability range for PEI's stock to trade within. And as you might expect, the ideal time to be a buyer is on a bounce off of support.

When you're looking to buy a stock within a trend channel, buying after a bounce off of support makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Keep that in mind when putting in a stop loss in PEI; the 200-day moving average looks like a good dynamic level for a stop.

For a tighter stop, I'd recommend exiting if shares move below their most recent swing low at $17.50.

Corporate Office Properties Trust

We're seeing the exact same setup right now in Corporate Office Properties Trust ( OFC). As the name implies, this REIT is an office building landlord. It's also a high yielder, with a 4% payout at current share price levels.

Like PEI, OFC is forming an uptrending channel. One big difference is that OFC has seen its trendline support level get tested more frequently than PEI has. While it may seem counterintuitive, more tests of support are actually a good thing because they demonstrate that shares can still catch a bid at their trendline. That makes support stronger in OFC's case.

With shares coming off of support at the start of this month, it makes sense to be a little patient if you're looking to enter a position in OFC. If history is any indication for this firm, we'll see another test of support before long.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.


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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to
TheStreet . Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily , and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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