Alexandria Real Estate (ARE) : Bearish Outlook

I have been bearish on various REITs for quite some time. The key reason is the amount of leveraged they have.

Surely, in this economic climate, financial institutions will be cutting back and reducing their lending exposures

With this in mind, highly leveraged REITs will faced significant challenges in raising funds to finance their borrowings.

For more in depth reads on such issue, try searching for Morningstar, Seeking Alpha and of course, via Google.

One of a possible short position which I have attempted is on  ARE.

From a technical analysis point of view, ARE  has just broke its long term support at around $32.

You can look at the chart here. For the past few sell down, it was able to hold at that level. But, last few trading days sees the support being broken and till Friday, it did not manage to clear that level.

Will this be the beginning of  a major slide for ARE?

Take a look at the chart:

Look at the volume that is associated with that price level. History suggest that there’s volume supporting it at around $32 range.

But, a further break down will suggest that this price level will not hold.


Alexandria Real Estate (ARE)

Richard Woon of Stripnomics has a good analysis of the challenges facing ARE.

I encourage those who are interested to find out more to visit his site.

My focus is to highlight ARE’s possible support level.

Like Richard, I have a negative outlook on ARE (and in general a number of REITs).

However, we need to be patient with ARE. For the very short term, it is unlikely to break below the support level of 32.77

Why? This is because, we have seen that level being supported 3 times since October 2008. ARE needs to have a very bad news for it to go below that level.

And, off my mind, one of the possibilities is securing refinancing needs.

For this chart, we cannot rely on the kumo for resistant analysis as ARE has a spike in price on 27 Feb. We can see that the Tenkan sen (pink line), the kumo all have ‘abnormal’ behavior because of the spike. However, we can still rely on the Chikou Span (green line) to find our support and resistant levels. 

Looking at the Kijun sen which is flattening out, it is suggesting that the price may stabilize around the trading level of 32 – 37.