The self-storage company and real estate investment trust based in Williamsville, New York, Life Storage Inc. (NYSE: LSI) seem to be gearing up for a surge as per its latest charts.
#1 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#2 Symmetrical Triangle Pattern: The daily chart shows that the stock has broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move.[hana-code-insert name=’adsense-article’ /]#3 IH&S Pattern: As you can see from the chart, over the past several weeks, the stock has been forming an Inverted Head and Shoulders (IH&S) pattern.
This is marked in orange color.
An IH&S pattern is a strong bullish pattern.
After the completion of this IH&S pattern, the stock may move higher in the short term.
#4 MACD above Signal Line: The daily chart shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
#5 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#6 Unbroken uptrend: The weekly chart shows that the stock is in an unbroken uptrend as it has been forming higher highs and higher lows during the past several months.
#7 Bullish Stochastic: As you can see from the weekly chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.
#8 MACD above Signal Line: The weekly chart also shows that the MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of LSI in two scenarios
- If the stock breaks out of the IH&S pattern. This translates to a daily close above $103.
- If the stock corrects to the lower end of the symmetrical triangle pattern, at around $96.20.
TP: Our target prices are $125 and $140 in the next 3-6 months.
SL: To limit risk, place a stop loss at $94.20 (entry near $96.20) and $99.40 (entry near $103). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 21% to 46% in the next 3-6 months.
- Entry at $96.20: For a risk of $2.00, the target rewards are $28.80 and $43.80. This is a nearly 1:14 and 1:30 risk-reward trade.
- Entry at $103.00: For a risk of $3.30, the target rewards are $22.00 and $37.00. This is a nearly 1:6 and 1:10 risk-reward trade.
In other words, this trade offers nearly 6X to 30X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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