In part I of this research post, we highlighted how the shifting landscape of the US real estate market may be setting up an incredible trading opportunity for technical traders. It is our belief that the continued capital shift which has been driving foreign investment into US assets, real estate, and other investments may be shifting away from US real estate as tell-tale signs of stress are starting to show. Foreclosures and price drops are one of the first signs that stress exists in the markets and we believe the real estate segment could be setting up for an incredible trade opportunity.
The Proshares Ultrashort Real Estate ETF (SRS) has recently completed a unique “washout low” price bottom that we believe may become an incredible trading opportunity for technical traders. If the US Fed pushes the market into a panic mode, sellers will become even more desperate to offload their homes and buyers will become even more discerning in terms of selecting what and when to buy.
Our opinion is that the recent “washout low” price bottom in SRS is very likely to be a unique “scouting party” low/bottom that may set up a very big move to the upside over the next 4 to 12+ months. If our research is correct, the continued forward navigation for the US Fed, global central banks and the average consumers buying and selling homes is about to become very volatile.
If SRS moves above the $25.50 level, our first upside Fibonacci price target and clears the $24.25 previous peak set in April 2019, it would be a very clear indication that a risk trade in Real Estate is back in play. Ideally, price holding above the $21.65 level would provide a very clear level of support negating any future price weakness below $21.50.
This weekly SRS chart highlights what we believe to be the optimal BUY ZONE and the upside price targets near $28 to $29. Since the bottom in 2009-10, after the credit market crisis, we have not seen any substantial risk in the Real Estate market for over 8+ years. Now, though, it is our opinion that this risk trade is very real and that technical trader should be aware of this potential move and what it means to protect assets and wealth.
If our research proves to be accurate and any future move by the US Fed will prompt a “rush to the exits” by home sellers, then there is really only one course of action left for us to consider. Either the Fed will reduce rates, buying some at-risk sellers a bit of time before a rush to sell overwhelms the markets and prices begin a fast decline in an attempt to secure quick buyers; or the Fed will leave rates at current levels where at-risk sellers will continue to attempt to offload their homes to any willing buyers before declining prices and panicked sellers start the “race to the bottom” in terms of pricing.
Concluding Thoughts
Real Estate has already run through the price advance cycle and the price maturity cycle. There is really only one cycle left to unfold at this point – the “price revaluation cycle”. This is where the opportunity lies with our suggested SRS trade setup.
We believe this bottom in SRS will result in a few more weeks of trading near price support (above $20 and below $22.50) where traders will be able to acquire their positions. The bigger move will happen as risk becomes more evident – very similar to what has recently happened in Gold. Once that risk is visible to traders/investors, the upside potentials ($28+ to $42+) won’t seem so illogical any longer.
You don’t have to be smart to make money in the stock market, you just need to think differently. That means: we do not equate an “up” market with a “good” market and vi versa – all markets present opportunities to make money!
We believe you can always take what the market gives you, and make a CONSISTENT money.
Learn more by visiting The Technical Traders!
Chris Vermeulen
Technical Traders Ltd.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.
Nice article, thanks for sharing!
Hello
I check past performance of SRS,it will be so negative.
So why you select only this ETF to invest?
There are many ETF which has A+ rating's cz condition to Rate cut is effect all over real estate fund.
Why this?
Real Estate sector is all ready spoiled through huge meaningless investments, it's a great unfortunate out-come that this sector had absorbed big big big fund, just to make speculation, and just according to that fact, we found "Sub-Prime" nightmare, and there is full of probabilities that Real Estate ETF may prove as one more blunder just Crypto Currencies alike.
Real Estate is a matter of Need and not meant for Greed, Ironically, from History, we found that Greed in this sector ended very badly with even worst impacts on entire financial sector.
As per my personal either directly or indirectly, no financing / investing is advisable in the interest of overall health and sustainability of Economy.