Stock Picks: Entergy and Extra Space Storage Incorporated

The S&P 500 (SPX) has managed to close at 2,656.30 on Friday, April 13. The index ended the week above the immediate resistance of 2,650. The market needs this cushion considering the conflict brewing in Syria. This uncertainty might increase selling pressure that can drive the index down.

As SPX struggles to stay above 2,600 support, let’s look at stocks that near firm support levels.

ETR – Entergy Corporation

Entergy Corporation (ETR) is an integrated holding company incorporated in 1992. Primarily engaged in electric power production and retail distribution operations. The company delivers electricity to 2.9 million customers in Texas, Mississippi, Louisiana, and Arkansas. The company currently owns and operates 30,000-megawatt aggregate electric generating capacity power plants.

Technical analysis show that Entergy appears poised to reclaim resistance of 80. This comes after the stock generated a higher low of 71.95 in February 2018. To complete the breakout, ETR must print volume of around 5 million on the daily chart. Those who bought the higher low might take profits at the resistance. The stock needs buyers to absorb the selling pressure.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of ETR is 34.68. Even though the PE ratio looks high, it appears to be low in relation to the stock’s five-year PE ratio range which has been 9.428 – 86.35. Based on this range, it seems that ETR may have some more room to grow.

The strategy is to buy the breakout at 80 as long as the volume requirement is met. If bulls successfully reclaim the resistance, they will use it to create a base and climb to our target of 98. The process may take more than six months.

Weekly ETR Chart

Monthly ETR Chart

As of this writing, the Entergy Corporation stock is trading at 79.09.

Summary of Strategy

Buy: Breakout at 80 as long as the stock prints over 5 million in volume on the daily chart.

Target: 98

Stop: Close of 74 after the breakout.

EXR – Extra Space Storage Incorporated

Extra Space Storage is an American company that acquires, owns, operates, manages, develops, and redevelops self-storage units. Founded in 1977, it is a self-administered and self-managed real estate investment trust (REIT). Now with 1,483 facilities across the US and Puerto Rico, the company has around 107 million square feet of net rentable space in approximately 960,000 units.

Technical analysis show that EXR is creating a large bullish continuation pattern on the weekly chart with a breakout point at 88. To complete the breakout, the stock must generate over 4 million in volume on the daily chart. Those who bought the higher low at 80 will most likely lock in their gains at the resistance level. The stock needs buyers to accommodate the increased selling activity.

Moreover, fundamental analysis show that EXR’s trailing twelve months (TTM) PE ratio stands at 23.16. The stock has upside potential because its average PE ratio (TTM) in the last five years has been 35.68.

The strategy is to buy the breakout at 88. If bulls complete the breakout, they will gather enough momentum to catapult EXR to our target of 106. The process may take more than six months.

Weekly EXR Chart

Monthly EXR Chart

As of this writing, the Extra Space Storage Incorporated stock is trading 87.08.

Summary of Strategy

Buy: Breakout at 88 as long as the stock prints over 4 million in volume.

Target: 106

Stop: 83

 

Featured image courtesy of Shutterstock.

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Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.