Trader’s Narrative

While US REITs breached their long term (200 day) moving average in early May, the Canadian REITs have just breached their’s. They have been getting roughed up all this month. But the selling has reached a point which I think has washed out all the weak hands.

For starters, the S&P/TSX Capped REIT Index is now below its 200 day moving average. As it has for the duration of this bull market, this has been a good entry into the sector. See graph below for more details.

Also, the selloff has taken almost all REITs much lower. Had the fall in the index been attributed to one or two large capitalization REITs, I wouldn’t be as confident of a washout. But looking at the percentage above moving averages we see that the sector is deeply oversold. There are only around 16% above their short term (10 day) and their intermediate (50 day) moving averages; and only 40% are above their long term 200 day moving averages.

On June 26th 2006 when we last saw the REIT index dip below its long term moving average, there were 20% above their 50 day and 200 day moving averages with 47% above their 10 day moving average.

With the new uptick in rates in the US and chatter about the end of cheap money, we could be seeing a major trend change with REITs. But evenso, they aren’t going to go straight down. I think this technical oversold picture in the short term is still actionable.

There are two newsworthy events in the sector also. A new mini-REIT has been born: Charter (CRH.un) finished its conversion last month. And Sunrize (SRQ.un) was bought out by Ventas (VTR), a US REIT, so it is off the list.

Click to Enlarge Graph

Here is the new list of Canadian REITs:

Allied Properties (AP.un)
Artis REIT (AX.un) - previously Westfield
BTB REIT (BTB.un)
Boardwalk (BEI.un)

Calloway (CWT.un)
Canadian Apartment Properties (CAR.un)
Canadian Hotel Income Properties (HOT.un)
Canadian REIT (REF.un)
Charter (CRH.un)
Chartwell Seniors Housing (CSH.un)
Cominar (CUF.un)
Crombie (CRR.un)

Dundee (D.un)
Extendicare (EXE.un)
H&R REIT (HR.un)
Holloway Lodging (HLR.un)
Huntingdon (HNT.un)

IPC US (IUR.un)
InnVest (INN.un)
InterRent (IIP.un)

Lakeview (LHR.un)
Lanesborough (LRT.un)
Legacy Hotel (LGY.un)

Morguard (MRT.un)
Northern (NPR.un)
Primaris (PMZ.un)
Public Storage (PUB)

Retrocom (RMM.un)
RioCan (REI.un)
Royal Host (RYL.un)
Scott’s REIT (SRQ.un)
Temple REIT (TR.un)
Whiterock (WRK.un)