Stock Picks: Essex Property Trust Incorporated and Edison International

The S&P 500 (SPX) resumed its climb yesterday, April 16, 2018, as it closed at 2,677.84. The price action encourages those who bought around 2,600 to keep holding their positions. This helps ease selling pressure, which may help bulls continue their ascent to the top end of the range at 2,800.

As the index shows signs of life, let’s look at stocks that are about to breakout.  

ESS – Essex Property Trust Incorporated

Essex Property Trust (ESS) is a publicly-traded real estate investment trust (REIT) company that acquires, develops, redevelops, and manages apartment communities. Founded in 1971, what started from 16 multifamily communities has now grown to 59,645 homes in 250 communities. The company operational segments include Southern California, Northern California, and Seattle Metro.

Technical analysis show that ESS is primed to take out resistance of 244 and trigger the large inverse head and shoulders pattern on the daily chart. To breach the resistance, the stock must print volume of at least 1 million shares on the daily chart. Bottom pickers are likely to dump positions at the resistance. ESS needs breakout buyers to come out and overwhelm sellers.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of ESS is 37.33. While the PE ratio looks high, it is still way below the stock’s five-year average of 54.99. Based on these figures, we can say that ESS has some more room to grow.

The strategy is to buy the breakout at 244 after the stock generates volume of 1 million shares. If bulls take out 244, they will gather enough momentum to sustain a climb to our target of 268. The process may take six months.

Daily ESS Chart

Weekly ESS Chart

As of this writing, the Essex Property Trust Incorporated stock is trading at 245.30.

Summary of Strategy

Buy: Breakout at 244 as long as the stock prints over 1 million in volume on the daily chart.

Target: 268

Stop: Close below 240 after the breakout.

EIX – Edison International

Edison International (EIX) is a public utility holding company. Founded in 1886, it is the parent company of Southern California Edison Company (SCE) and Edison Energy Group Incorporated (Edison Energy Group). SCE supplies and delivers electricity to Southern California, while Edison Energy Group is a holding company for subsidiaries focused on finding business opportunities across energy services.

Technical analysis show that EIX is poised to take out resistance of 65 and trigger an inverse head and shoulders reversal pattern on the daily chart. This comes after the stock generated a higher low of 61.47 on March 26, 2018.

To complete the breakout, bulls must generate volume of at least six million shares on the daily chart. Those who bought the bottom and those who bought the higher low are likely to take profits at the resistance. The market needs buyers to absorb the selling pressure.

Moreover, fundamental analysis show that EIX’s trailing twelve months (TTM) PE ratio stands at 38. This looks like a high PE ratio but it is still low in relation to its five-year PE ratio range which is 10.57 – 225.55. With such a wide range, EIX has a lot of upside potential.

The strategy is to buy the breakout at 65 as long as the volume requirement is met. If bulls complete the breakout, they will gather enough momentum to push EIX to our target of 72. The process may take more than a month.

Daily EIX Chart

Weekly EIX Chart

As of this writing, the Edison International stock is trading 64.64.

Summary of Strategy

Buy: Breakout at 65 as long as the stock prints over 6 million in volume on the daily chart.

Target: 72

Stop: Close below 63 after the breakout.

 

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.