One of the best returns for this year has been from the Real Estate index. On the charts, we find that the Real Estate index has moved around 150% higher already from its low formed in Feb 2016. While that may look very large in absolute terms, it has to be seen in the context of the huge collapse in the sector over the past several years. From the highs made back in 2008, the stocks have been on a continuous decline that finally culminated in Feb 2016. This resulted in a 93% erosion of the high level of the Realty index. So this big rise is more a base effect thing.
Since the index chart shows the classic setup of a bottoming formation (we have a proprietary 9-step bottoming formation that we teach in our Mentoring programs), we must now look for a larger corrective move to emerging, if not a downright new trend to emerge altogether! If one looks at the chart, the 23.6% retracement is also quite a distance away from the current levels. In fact, if the index is expected to make it at least those levels (which is the bare minimum anyway), then to we can expect prices of some of the stocks to double from current levels! This because the 0.236 retracement represents a 300% increase from the lows, of which we have so far done only 149%!!!
What is even more interesting is that if prices go to those levels, there is a chance that the prices could form another interesting rounding pattern if it were to go up to those retracement levels unhindered now! That can set up, even more, gains for the future if it were to happen. Looking at the fact that the momentum charts are turned positive even on the monthly time frame, it seems quite possible that prices will continue to rise.
But let’s not get ahead of ourselves here. The very fact that we have room for almost 100% gains from here is enough to get our juices flowing. What are the stocks that we could look at from this area to play this potential upside? Obviously, we should look at the ones in the F&O space first. With IBReal set to exit the list, we have only DLF and Hdil as possible plays. Of the two, DLF is the preferred bet with a slight out performance of the sector index.
The weekly chart attached of DLF shows that Stock formed the bottom in Feb 2016 and thereafter has been in the strong uptrend as we find stock is forming series of Higher highs and higher lows confirming the bullish trend in stock. Thus every decline in the stock towards the support shall be utilized as buying opportunity. This week price printed fresh 52 weeks higher and has formed higher high breaking its previous swing high. In near to medium term we find 244-253 should act as key resistance zone and above that 279-285 is next levels to watch for.
Among the top performers in the sector, stocks like Eldeco Housing (733%), Emami Infra (580%) and IB Real (227%) have shown high returns in last one year. This is followed up by Kolte Patil (146%), Purvankara (132%), Prozone Intuit (119%) and Godrej Prop (114%). The more well-known names like Brigade (100%), Sobha (84%), Oberoi (82%) and TCI Developers (96%) are also outperformers compared to the Realty index.
The market is the best judge of which are the best stocks. The relative performance measure shows us where the money is going into. Hence, the above list of stocks may be the ones to play the potential upside in the sector.
Almost all of them have had a strong run in recent times. Hence it would be prudent to wait for a pullback in the sector to enter into plays. We should take a 12-18 month time frame to expect the gains to roll in.
Among reality sector, we have found out few attractive chart setup which can yield good returns if momentum, in reality sector, continues to persist.
Sobha Developers Ltd
Post series of decline from the listing day stock went into long sideways consolidation mode since 2009. This long consolidation has been now set to break and stock to enter into new trading range. Currently, stock price is trading near 50% retracement levels which are placed near 623-628 levels. If price breaks and successfully hold above-said level we can expect the price to extend its advance towards 750-760 levels which is 61.8% retracement levels of its previous fall from 1182 to 67.45 levels.
The Monthly chart of Purvankara correlates with the current positive trend of reality sector, in which we find the price, is attempting to give a breakout from the 9yrs consolidation range. 145 levels have to be a strong resistance in the past were price attempted couple of time but failed to do so. This time the breakout has been confirmedly supported by the strong momentum were RSI traded and sustain above 60 which the stock never did in the past. Currently, the price is trading at 23.6 Fibonacci retracements of his whole big down swing from 535 to 25.60. If price successfully trades and sustains above the said level we can expect 220 levels which is 38.2 retracement levels. Thus among realty space, this stock should be kept in radar and closely watch.
TCI Developer Ltd
The attached chart is the weekly chart of TCI developer shows that the stock is in a strong uptrend as we find the stock is trading in ascending parallel channel since last more than 3 yrs. The stock has formed significant peak and bottoms ne the r higher end and the lower end of the channel as depicts in the chart. This week stock has given a fresh breakout from the channel which is the positive sign and currently, price is trading near a small hurdle at 615 which is to be 127
Looking at the realty sector as a whole we find more potential is left and can continue to advance and be best performer sector comparing the benchmark in coming months. Reality sector is showing some positive sign after many many years. We believe this sector will do well for a couple of years and one should now bring there focus back to this sector. We have found out some attractive chart setup which can yield some good returns.