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Tickers in this Article: JLL, KIM, BFS, MAC
Stepping into a weak market with the intention of buying a stock can often be a difficult task for traders. In many cases, a newbie trader will buy whatever has dropped the most with the idea that it is a "bargain" and that it will have an ample amount of reward. While once in a while a trader can catch a falling knife, over the long run, it's difficult to avoid being cut.

Rather than buying stocks that have been crushed, a trader may wish to look for stocks that have held up through a pullback in the markets. The 50-day moving average is often a level that divides stocks that are acting strong and weak on an intermediate-term basis. When a stock remains above its rising 50-day moving average through an extended period of market weakness, it reveals underlying strength as market participants refuse to let it succumb to selling pressure. Interestingly, the REIT sector has several individual stocks that are testing their 50-day moving average as the markets are becoming a little oversold.

Jones Lang Lasalle (NYSE:JLL) is an example of a stock that has held up technically, despite being under pressure along with the markets over the past week. JLL has pulled back almost 10% in the past few sessions and is in the process of testing its rising 50-day moving average. It is also pulling back toward its prior breakout area near $55. While there is no guarantee that JLL will reverse from this area, this would be a logical spot for buyers to step in and possibly support the stock.


Kimco Realty Corporation (NYSE:KIM) is another REIT that is testing its rising 50-day moving average. This stock is a little weaker than JLL as it is still under its summer highs, but Kimco did clear a trading range that was forming a descending triangle on the chart. Currently, KIM is pulling back to test the breakout area as it slows down near the 50-day moving average. It could find support here, or it could reverse to test its prior highs.


Saul Centers Inc. (NYSE:BFS) is a lesser-known REIT that happens to be in a position of strength. It recently cleared a base and has held above the base and well above its 50-day moving average despite the recent market weakness. It is currently consolidating above its base and could resume the breakout if the markets rebound from oversold conditions. (For more, check out The Anatomy Of Trading Breakouts.)


Macerich Co. (NYSE:MAC) is an REIT with conflicting signals. MAC recently set a new recovery high as it cleared a symmetrical triangle in December. However, the breakout failed very quickly and MAC pulled back to the breakout area and 50-day moving average. It looked like it was going to find support, but probed new lows last week. MAC is in a critical area here, as a move lower would likely signal a breakout failure. A move higher would imply a successful test of the breakout and imply a move to new highs.


Bottom Line
Because the vast majority of stocks will eventually follow the general markets, traders can't get too comfortable and buy stocks simply because they have held up better than the rest. There are no guarantees that the markets will rebound and head higher. However, finding stocks that are showing relative strength can give a trader an edge when the markets finally rebound. At worst, buying a stock emerging from a healthy chart setup allows a trader to minimize risk in the case of renewed weakness. Many of the stocks above are in relatively good shape as the markets become oversold. If the markets can find support here, these stocks may be in a good position for new highs. (For more, check out The REIT Way.)

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

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

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