History Says Sell This Real Estate Stock

Kimco stock tends to drop after hitting its 320-day trendline

Managing Editor
Aug 24, 2018 at 12:31 PM
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Several retail stocks are lower today on weak earnings reports. What's more, the shares of real estate investment trust (REIT) Kimco Realty Corp (NYSE:KIM) -- which owns and operates open-air shopping centers -- recently bounced into a key trendline, sending up a historical "sell" signal. Below we will take a look at how KIM has been faring on the charts, and dive into why now may be an attractive time to bet on the stock's next leg lower.

At last check, Kimco stock is up 0.1% at $17.06, after recently bouncing off support in the $16 region. The stock's upside momentum has stalled at its 320-day moving average, which has had bearish implications in the past for KIM.

Daily Chart of KIM with 320 MA

More specifically, Kimco shares are now within one standard deviation of their 320-day moving average, after a lengthy stretch below this trendline. There have been two similar signals of this kind in the past three years, after which KIM went on to average a one-week loss of 3.35%, with half of those returns positive, per Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the stock was lower 100% of the time, and down an average of 4.9%. A similar pullback from current levels would place KIM back around $16.22.

Traders looking to speculate on KIM's short-term trajectory should consider doing so with options. The equity's Schaeffer's Volatility Index (SVI) of 22% is in the 6th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations right now.

Wall Street is already bearish toward KIM, however. Of the 14 analysts in coverage, 11 sport tepid "hold" or "strong sell" ratings. Also worth noting, short interest plunged nearly 10% during the most recent reporting period, but still accounts for nearly a week's worth of trading, at KIM's average daily volume.

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