Turning Gloom into Boom

11/30/2012 7:00 am EST

Focus: STRATEGIES

Frank Zorrilla

Founder and Chief Investment Officer, Zor Capital

A potentially dark technical picture in commercial real estate can be exploited by this setup from Frank Zorilla of ZorTrades.com.

The Dow Jones US Real Estate Index (IYR) is testing critical levels. If one is aggressive and believes in shorting, a decent risk-reward opportunity has presented itself. As you can see from the daily chart below the IYR is testing the $63.50-$64 level, which has acted as support since the end of June until it finally broke that level on November 8, 2012.

On the weekly chart it is testing a more significant level, which is the underside of the ascending trendline that started in March 2009. The opportunity lies in a short trade against a closing move above the declining 50-day moving average ($64.25) and the first target will be a retest of the recent low $60.84. DRV is 3x IYR inverse ETF. Currently 95% of the stocks within the IYR are trading above their 10-day moving average, and it’s up five out of the last six days.

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WEEKLY CHART

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If this idea makes sense to you, then play at your own risk, and know your risk. Consult your broker/advisor/etc.

By Frank Zorilla of ZorTrades.com

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