Zak Mir on how to trade London Real Estate: Foxtons, Savills and Zoopla

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As I am happily renting in central London, all of the controversy, the joy and the pain of house prices escape me currently. Given how expensive living anywhere worth living is, I doubt I will be a property owner here again. For some reason this actually provides a sense of relief rather than disappointment.

Instead, I am able to get a modicum of vicarious thrills and spills by looking at the charting position of those stocks which best reflect how the market feels about real estate. Indeed, as we know estate agents, both the traditional and online variety are effectively highly geared to the “commodity” on which they are based. I suppose the final thing to remember is that notionally if there was panic selling, say after the General Election, they might benefit from increased commission volumes. The only scenario which may not be so good for the likes of Foxtons (FOXT) is if over the next 100 days or so, there is a lull in the market as homeowners await Prime Minister Milliband! Only joking, that could never happen….

Getting back to Foxtons, on the daily chart we have something of a repeat of the last IPO in 2007, which managed to pick out a top in property. That said, the share price decline has so far been at odds with prices, which have if anything squeezed higher. Instead, what we see here since March is a definite decline in sentiment, as euphoria gives way to reality. The hope now from a bullish perspective is that the gap to the downside in October was an exhaustion feature and that we are looking at a potential turnaround situation. However, given how severe the decline has been it would be a brave trader who decides to jump the gun ahead of a weekly close back above the gap floor at 187p. This is even though the latest key reversal day to the upside is a very strong buy signal. The view is that if this trigger is activated Foxtons shares would head back towards the top of a rising trend channel from October as high as 225p over the following 1-2 months.

Next up is “upmarket” estate agent Savills (SVS) where somehow the operatives sound even more posh than I do, and I am sure they did not all go to Harrow, or of course the far superior, Eton. But while we ponder such issues, or not, it can be seen on the daily chart of the stock how there has been a range breakout via an unfilled gap to the upside. This would appear to be highly significant from a technical perspective, and suggest that while there is no end of day close back below the 10 day moving average at 714p the upside here over the next 1-2 months could be as great as the overall August 2013 price channel top of 790p.

Finally, we are looking at one of the new online estate agents, Zoopla (ZPLA). You will have to take my word for it that I spotted this as a turnaround prospect before the latest 12% one day rise. But from this point on it would appear there could still be a reasonable upside to chase in the sense that provided there is no end of day close back below the 20 day moving average at 175p the top of the July descending price channel at 210p would appear to be on the cards over the next 2-4 weeks.

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