The REIT sector has confounded many market participants as it continues to perform despite generally negative sentiment. Interestingly, the strength has not been limited to the larger names in this space like Simon Property Group, Inc. (NYSE:SPG) or Public Storage (NYSE:PSA). Many smaller names have also performed well and managed to avoid too much damage with some of the recent market weakness. While that market weakness may continue, many stocks in this group are already well into a consolidation and possibly getting ready to emerge from their bases. This could play out well if the markets defy the odds and continue to press higher.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Corrections Corporation of America (NYSE:CXW), for instance, has been consolidating since October of 2010. It has been forming a descending triangle base as it consolidates and its volatility has been steadily decreasing. Its trading volume has also been tapering off which is another sign of healthy consolidation. Traders need to watch the $24 level for support and I wouldn't rule out one more shakeout near or just under this level. If CXW can clear approximately near the $26 level, it could lead to a breakout and continuation of the uptrend.

Inland Real Estate Corporation (NYSE:IRC) has also been consolidating since October 2010. However, IRC is actually already attempting a breakout which is impressive. IRC had been finding resistance near $9.20 but was able to finally clear it on Tuesday. This area should now become a support level and would be the level to watch for traders in the near future. (For more, see The Anatomy Of Trading Breakouts.)

Alexandria Real Estate Equities (NYSE:ARE) is another stock in the REIT sector that has already started to emerge from its base. In ARE's case, it had been in a consolidation for a much longer time. In fact, ARE has been trading sideways since April (not shown). ARE is finally clearing the important $75 level and could be ready to emerge from this base. Traders should watch this level as there may be some sideways trading near this area to confirm support.

Brookfield Properties Corporation (NYSE:BPO) is another REIT to watch. It has been narrowing in range after a volatile pullback off its November highs. It held $16 as support in December and has been holding steady near $18 for about a month. Traders should watch this level as a move above $18 could lead to a breakout. A break below $17 would likely lead to a retest of the $16 level. (For more, see How To Assess A REIT.)

The Bottom Line
There are times in the markets where it almost doesn't matter what stocks you trade because they all act in unison. However, the later in a rally it gets, the more selective traders must be. Many momentum stocks have been getting crushed recently, which is the markets way of telling us that they are priced to perfection. Traders are better served looking for a group into which this money can rotate. The REIT group has been consolidating for several weeks and could be a possible target for this money. (For more, see 4 REIT ETFs For 2011.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  2. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  3. Active Trading Fundamentals

    New Traders: Trade the Market in 5 Steps

    New traders shouldn’t throw money at securities without knowing why prices move. Follow these five steps to tilt the odds in your favor.
  4. Chart Advisor

    Watch For a Bounce in These Emerging Markets (BRF, PEK)

    While downtrends are clearly in control of the direction of many emerging market ETFs, short-term indicators suggest a bounce higher could be in the cards.
  5. Investing Basics

    Valuation Models: Apple’s Stock Analysis With CAPM

    The capital asset pricing model, or the CAPM, estimates the expected return of an asset based on the systematic risk of the asset’s return.
  6. Stock Analysis

    Will "FANG" Stocks Outperform in 2016?

    Facebook held the most bullish accumulation-distribution pattern into year’s end, telling investors to focus on this issue in 2016.
  7. Chart Advisor

    Stocks At Buy Points In Healthy Uptrends

    These stocks are in healthy long-term uptrends, and a recent pullback presents a buying opportunity.
  8. Chart Advisor

    The Uptrend Is Reversing In Financials

    Active traders are turning to financials because the close below several key long-term support levels suggest that the uptrend is about to reverse,
  9. Chart Advisor

    These 3 Charts Suggest Bears Control The Commodity Markets

    Many investors are wondering if they should be betting on a trend reversal in commodities. These charts suggest that a reversal might be further out than many hope.
  10. Chart Advisor

    Are Rises In These Stocks and REITs Sustainable?

    These stocks have been strong recently, but there are cautionary signs. Watch for these sell signals.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center