Momentum stocks are the most beautiful type of investment. The run on autopilot.
Within the category of momentum stocks there are different ‘levels’ of momentum. Some stocks typically rally, correct (significantly enough to lose momentum), but then continue their rally. In such a case, the pattern is somehow disrupted.
Very rarely is a stock going straight from the left bottom to the right top of the chart, surely on a multi-year basis.
Extra Space Storage, symbol EXR, is the most beautiful type of momentum stock one can imagine. The weekly chart (first chart below) makes our point. Note how the even the 90 week moving average is not tested at all, except for one specific week during the 2011 crisis, and that’s really it. Incredibly, really! There is nothing to note on the chart, nothing to analyze, only to conclude that the chart looks GREAT.
On the daily chart, we observe an ascending trendline which has been tested several times over the last 24 months. Two other observations stand out. First, volume is very healthy, as it’s rising on higher prices. Second, we see that the price has risen too far from the support line, suggesting that a pullback is in the cards.
We expect an opportunity over the coming weeks to step in at slightly lower prices. Look for the 80 to 82 area, i.e. the last two peaks, for an excellent entry point. EXR is a great momentum stock, so beautiful that is truly exceptional to find.
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