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This is a problem for real estate

Surprising news out of the real estate market may mean worries for the largest residential rental real estate investment trust in America.

Real estate data firm Reis reports U.S. apartment rental ticked up to 4.2 percent in the third quarter of 2014. That's the first time vacancies have gone up since 2009.

For quite some time now, many in the industry have been talking about a shift away from home ownership as millennials hold off on starting families and demand for city living increases.

One of the biggest proponents of this theory has been Sam Zell, chairman of Equity Residential, the nation's largest residential rental REIT that owns over 100,000 rental units.

"You're drawing all the young people in America to these 24/7 cities. The last thing they want to do is live in the suburbs," Zell said last year on CNBC. "In that respect, you're increasing demand for housing in the urban markets."

The markets agreed and shares of Equity Residential gained 30 percent in the first eight months of this year. But since making an all-time high in early September, shares are down 8 percent.

Has the tide turned against Zell and Equity Residential?

"We should have taken the cue from Sam Zell back in the beginning of the year when he filed and sold shares," said David Seaburg, head of equity sales trading at Cowen and Company. At the start of August, Zell sold 2 million shares for a total of $129.8 million, according to public records. "That was the tell at the top of the REIT market."

Seaburg sees headwinds for Equity Residential shares due to potentially higher interest rates down the road in the U.S. and high valuations. "This stock looks relatively expensive," he said. "There's a cap on this stock for the near term."

But from a technicals perspective, Richard Ross, global technical strategist at Auerbach Grayson, sees some positive signs for shares, at least for now.

"In the short term, I think we have a nice little technical setup here," said Ross, a "Talking Numbers" contributor. "Real estate stocks have outperformed the broader market on a year-to-date basis and within this sector, Equity Residential has outperformed so I like that relative strength."

Ross' year-to-date chart show Equity Residential was riding an upward-sloping trend line, only to break it last month. However, it bounced above a support line which coincided with the stock's 200-day moving average at around the $60 per share level.

"But that's where the story gets interesting because we hold the 200-day moving average and that very well-defined chart support," Ross said. "I think that textbook… correction has created a nice little tradable buying opportunity."

But the long-term chart is not nearly as promising, if Ross is correct.

After trading in a well-defined trading between $50 and $65 since 2011, Equity Residential finally broke out to make fresh all-time highs this past summer. But that now appears to be a false breakout, Ross said.

"That's bad," added Ross. "That's a reason for caution in the longer term."

To see the full discussion on Equity Residential, with Seaburg on the fundamentals and Ross on the technicals, watch the above video.

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