The High Handle Setup

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In my ongoing analysis of the real estate sector in stocks, the REITs continue to act well. The Macerich Company, a REIT with various interests, presents a particular technical setup that is a variation of a cup and handle bullish formation. On the weekly chart below, you can see a clear “cup” of two well-defined attempts to breach the $56.50 level, dating back to last summer. Actually if you stretch the weekly chart out further, you can see that the $56.50 level was the last stop in 2008 before crashing along with the broad market.

After forming its “cup” Macerich has refused to pull back much this time around. Instead, it is flashing a high “handle,” basing just underneath the key breakout level. The high handle, rather than a regular one, denotes the firmness of demand for the stock. Trading is not about guarantees, but rather playing odds and probabilities, with an exit strategy in mind in case the trade fails to work out. In this setup, MAC has increasingly grown comfortable with high prices after each thrust up to resistance.

Thus, the presumption is that the sellers are losing steam while the buyers might just be getting started, especially if they can violate and hold above the $56.50 to the upside. This high handle setup is one of the top ideas I see in the IYR sector, which has been acting noticeably better of late. Also note that I would grow weary of the long setup if the bulls lose the $51 level.

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