Vanguard Real Estate ETF Is Probing a Breakout
With the promise of rate cuts coming, this real estate ETF has a notably strong setup.
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Some of these breakdowns in tech land are getting downright nasty. It’s possible the results from Advanced Micro Devices AMD or a rally in Nvidia NVDA might shift sentiment to become bullish again, but Microsoft MSFT struggled to find green after its earnings report.
Dell Technologies DELL, a name perpetually on my watchlist but one that I stepped aside from before its last earnings announcement, has erased one-third of its value from late May.
Shares are now trading at the 200-day exponential moving average (EMA), a level not seen since 2023. If you are a trader who likes to buy falling knives, you have theoretical support at this 200-day EMA plus the prior gap low from March. If this area fails, we should expect a gap fill with a fall to $95. That opens the door to a complete roundtrip of the Dell AI-hype-filled run of 2024.
Dell is a great reminder to take profits and use trailing stops when moving higher, no matter how much hype surrounds a company or its sector. I would prefer to see the Full Stochastics indicator, which I use for longer-term trends, swing higher here, but if you are playing the potential bounce, then keep a tight stop and look for some profit-taking around $120 and $126.
Shifting toward a sector that’s working, let's consider real estate. We have some recent earnings reports around higher-end consumer spending that came in shy of expectations. That disappointment is increasing the market belief that we’ll see two rate cuts this year rather than one.
That benefits small caps, financials and real estate. You can just look at any of the three charts and see the strength and breakout potential. While I’ve profiled financials and small caps already, the Vanguard Real Estate ETF VNQ may have the strongest setup.
After the mid-July breakout, VNQ pulled back to the 10-day exponential moving average and rode it for a few days. Now, VNQ is probing a breakout. Near-term, my target sits at $94, but I believe we have the potential to ride to $100 by the time we hit Election Day. If VNX closes under the 10-day EMA, I would watch closely because a break under the 21-day EMA should push bulls to the sidelines. But, until we hit that point, don’t fight the trend.
At the time of publication, Byrne was long VNQ.
