One sector that benefited enormously from ultra-low interest rates was real estate…

But that was before March 2022 when the Fed kicked off one of the most aggressive rate hiking cycles in U.S. history. And as the Fed rapidly tightened the screws, the iShares U.S. Real Estate ETF (IYR) ran out of steam and headed down.

IYR’s share price nearly doubled from March 2020 to the end of 2021… then plummeted by about 35% before it bottomed out in mid-October 2022.

It then rallied to a lower high earlier this year before it plunged again by about 20% over a brutal six-week period.

When we last checked in on it (red arrow in the chart below), it appeared to be in the early stages of a recovery. That was at the start of last month.

So, today, I want to check back in on IYR to see how things have panned out since then…

Smaller Counter-rallies

On the chart below, the 50-day moving average (MA, blue line) shows IYR’s clear downtrend.

Over this period, IYR made a series of lower highs at ‘A’, ‘B’, and ‘C’ – a common bear pattern…

iShares U.S. Real Estate ETF (IYR)

Source: eSignal

With each down leg that followed these lower peaks, the Relative Strength Index (RSI) reversed and moved lower from overbought territory (upper gray dashed line).

Then the shorter-term 10-day MA (red line) crossed down below the 50-day MA and confirmed these down moves.

They then accelerated when the RSI broke through support (green line) and stalled in the lower half of its range.

But when we last checked out IYR on April 5, a particular pattern within these bigger moves caught my attention…

Look at the smaller counter-rallies to the minor peaks at ‘a’ and ‘b’.

After falling from ‘A’, IYR made a countermove up to ‘a’ against the major downtrend… before it reversed and dropped lower.

This pattern then repeated at ‘B’…

IYR counter-rallied up to a minor peak at ‘b’ before it rolled over and fell lower.

So, we looked for whether the same pattern would repeat after the down leg that followed ‘C’…

After bottoming out in March, IYR bounced. The RSI formed a ‘V’ and rallied from oversold territory (lower gray dashed line).

But that rally stalled… along with the RSI. It pushed right up against resistance (green line) but was ultimately unable to break through.

Since then, the RSI has moved along that level and only just recently broke higher.

So, what am I looking for around here?

Reverse and Track Lower

The RSI’s recent move into its upper band indicates IYR could soon break higher….

However, for IYR’s stalled rally to resume (off its March low), the RSI needs to gain further traction in the upper half of its range.

If the RSI reverses and begins to move lower instead, IYR will likely lock in its next minor peak at what will become ‘c’…

I’m also watching our two MA’s…

Right now, the 10-day MA looks to be on the verge of crossing above the 50-day MA. Such a move would add to bullish sentiment.

But again, if that move peters out and the 10-day MA instead reverses lower, then that will add further evidence that IYR has peaked (at ‘c’) and that its next move is down.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

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