BALTIMORE (Stockpickr) -- If you've owned real estate investment trusts in recent years, you're probably feeling pretty happy. Long-term, it's been hard to lose money with them.
For example, between the start of 2010 and the end of 2014, the big SPDR Dow Jones REIT ETF (RWR - Get Report) has rallied about 90% -- not counting another 23% or so in big fat dividend payouts. Put simply, with rebounding real estate prices and near-zero interest rates, REITs have been handily outperforming the rest of the market in the last several years.
Unfortunately, that hasn't quite been the case so far in 2015. Year-to-date, REITs have been one of the worst-performing asset classes, dragged lower by the Fed's threat of higher interest rates hammering income stocks. But don't give up on REITs just yet. Some of the biggest names are showing signs of a turnaround this spring.
To take full advantage, we're turning to the technicals for a look at five big REITs to trade for breakout gains this week.
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.
Without further ado, let's take a look at five technical setups worth trading now.
Up first on the list is $21 billion office REIT Boston Properties (BXP - Get Report). BXP has been in bull mode over the last year, rallying more than 17% since last April. But don't worry if you've missed the move higher in this stock A classic technical setup is pointing toward even higher ground ahead.
Boston Properties is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares at $145 and uptrending support to the downside. Basically, as BXP bounces between those two technically significant price levels, it's been getting squeezed closer and closer to a breakout above our $145 price ceiling. When that happens, we've got our buy signal.
Relative Strength, down at the bottom of the chart, adds some extra evidence to the upside in BXP. That's because relative strength has been in an uptrend of its own since last fall, which indicates that BXP isn't just moving higher -- it's outperforming the rest of the market long-term. As long as that relative strength uptrend remains intact, Boston Properties should keep beating the S&P.
Vornado Realty Trust
VNO is currently forming a symmetrical triangle, or "coil," pattern, a bullish continuation setup that's formed by a pair of converging trend lines. Consolidation patterns such as the symmetrical triangle are common after big moves. They give investors a chance to catch their breath and figure out their next step. The buy signal comes on a breakout to the topside of the pattern, currently right at the $112.50 level. If shares can catch a bid above $112.50, then we've got a strong indication that the sideways trading is over and buyers are ready to step up their trading in Vornado.
The tightening price range of VNO's symmetrical triangle is setting shares up for a volatility squeeze. Since volatility is cyclical, periods of very low volatility are typically followed up by a swing to high volatility. That means that VNO's breakout is likely to be very fast.
Don’t miss it. VNO is a buy above $112.50.
Host Hotels & Resorts
Things haven't looked so hot lately in shares of $15 billion hotel REIT Host Hotels & Resorts (HST - Get Report). Since the calendar flipped to January, this big hotelier has shed more than 13% of its market value, correcting alongside the rest of the segment. But after stumbling, Host is starting to show some signs of strength again. Shares look like they could be bottoming here.
Host looks like it's in the final stages of a double bottom pattern, a bullish reversal pattern that looks just like it sounds. The double bottom is formed by a pair of swing lows that find support at approximately the same price level. The buy signal comes on a breakout through the peak that separates though two troughs. For HST, that's the $21.50 breakout level.
Momentum, measured by 14-day RSI, adds some extra upside confidence to the setup in Host Hotels & Resorts. Our momentum gauge has been in an uptrend since March, making higher lows during HST's pair of price lows. That's a bullish divergence that indicates that buying pressure has been building under the surface. When $21.50 gets taken out, HST becomes a buy.
Starwood Property Trust
Mortgage REIT Starwood Property Trust (SPG) has been a stark contrast from the rest of the REIT segment in 2015. That's becausee while most REITs have been correcting (or flat) so far this year, STWD has actually been outperforming the rest of the market, up more than 6% when you factor in dividend payouts. The good news is that now looks like a great opportunity to be a buyer in Starwood -- and you don't need to be an expert technical trader to figure this chart out.
STWD has been in a well-defined uptrending channel since last fall, providing a very tradable setup for buyers to get in along the way. The uptrending channel in Starwood is formed by a pair of parallel trend lines that identify the high-probability range for shares to stay stuck within. So far, every test of trend line support has been a low-risk, high-reward opportunity to be a buyer in this stock. Now it makes sense to buy this latest bounce higher.
Waiting for that bounce is important for two key 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). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring STWD can actually still catch a bid along that line before you put your money on shares.
Medical Properties Trust
Last on our list of tradable REITs is Medical Properties Trust (MPW - Get Report), a $3 billion health care facility landlord. After moving some 20% higher since last October, MPW has spent most of 2015 churning sideways -- but it's that sideways churn that makes this medical real estate owner tradable here. While the price pattern in MPW isn't exactly "textbook," it's very tradable.
MPW is currently forming an inverse head and shoulders pattern. You can spot the inverse head and shoulders by looking for two swing lows that bottom out around the same level (the shoulders), separated by a bigger trough called the head. The buy signal comes on the breakout above the pattern's "neckline" level. That's the $15.25 level in Medical Properties Trust.
This pattern isn't exactly textbook. The inverse head and shoulders normally comes in as a reversal pattern at the bottom of a downtrend, not the top of an uptrend like in MPW. But that's not a cause for concern here. Either way, the trading implications are the same on a push through $15.25. Be reactionary and wait for that $15.25 level to get taken out before you jump into the MPW trade. So far, sellers have been able to dominate buying pressure at that level, but as soon as that changes, you'll want to own it.