Lockheed Martin, Target and property REIT stock Extra Space Storage rank among this week's top stocks to watch, amid rising interest rates and inflation. Paychex and Weyerhaeuser also make the cut.
Extra Space Storage, an equity REIT, and its peers are acting well while the stock market wilts again. They remain above their 50-day moving averages while the S&P 500 has undercut that key support level.
EXR stock is in buy range while Weyerhaeuser, another REIT, is near a buy point. Target and Lockheed Martin continue to work buy points. Paychex has fallen below an entry but still has positive qualities. Bear in mind that this is a time to be building watchlists for the next uptrend rather than buying stocks.
IBD Live: A New Tool For Daily Stock Market Analysis
On a weekly MarketSmith chart, the relative strength lines for Extra Space Storage and Weyerhaeuser, both REIT stocks, are hitting bullish new highs, indicated by a blue circle at the end of their RS lines. The RS lines for Paychex and Lockheed Martin are just below recent highs.
A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
Stock Market Action: Watch The RS Line
The relative strength line is a quick way to spot winners in any market — up or down.
The Relative Strength At New High stocks list is a great place to look for quality names with strong RS lines. IBD's stock research platform MarketSmith has a screening tool that identifies stocks with RS lines making new highs.
In addition, the best growth stocks have a Composite Rating of 90 or better, out of a best-possible 99. The IBD Composite Rating combines key fundamental and technical metrics in a single, easy-to-use score.
Most of the stocks to watch this week meet that bar. EXR stock leads with a superior Comp Rating of 97. Paychex and Target enjoy a 95 each. Weyerhaeuser bears a 93 and Lockheed earns a still-strong 86.
REIT Stock: Extra Space Storage
Extra Space Storage rallied in three of the past four weeks, regaining its 10-week line. EXR stock shows a 215.01 buy point from a cup-with-handle base on the weekly chart. Extra Space stock cleared that weekly entry on April 19, but fell back late in the week to below that buy point. On the daily chart, it topped a 211.15 handle entry April 6 and is within the 5% buy zone from that breakout.
The REIT stock remains above a rising 21-day exponential average as well as its 50-day line in a challenging market.
The RS line for Extra Space Storage stock is making a new high after a strong rally in the past year, according to MarketSmith chart analysis It surged in the past month as the Fed hiked a benchmark interest rate for the first time since 2018 and signaled six more hikes to come in 2022.
EXR stock shows an IBD Relative Strength Rating of 93 out of 99. That means it has outperformed 93% of all stocks in IBD's database over the past 12 months.
It's also backed by a strong EPS Rating of 90 out of 99.
Extra Space Storage, the nation's No. 2 self-storage operator, should benefit from rising rates like many other financial companies as well as equity REITs or real estate investment trusts. In the last 5 years, EXR added $4.6 billion in new acquisitions to its portfolio of storage facilities.
Weyerhaeuser Stock: Rising Interest Rates
Shares of Weyerhaeuser also rallied to regain the 10-week average in recent weeks. On a weekly chart, Weyerhaeuser stock sits less than 5% below a 43.14 cup-shape base. WY stock could be starting to work on a handle.
The relative strength line for WY stock is making a new high on the weekly chart. However, it does not show the same strong uptrend in the past year that its REIT peer Extra Space shows.
Weyerhaeuser earns an RS Rating of 88 and an EPS score of 72.
A timberland REIT, Weyerhaeuser owns or runs millions of acres of timberland and could also benefit from higher interest rates. It also makes lumber and other wood products.
Paychex Stock: Rising Inflation Play
The payroll and HR services operator has retreated below a 139.07 buy point from a cup base. Paychex stock topped that entry March 31 but then traded around the buy point for the next three weeks. But on Friday, shares tumbled 5% to 131.35, knifing below its 21-day line for the first time in more than a month.
However, PAYX stock sits well above the 50-day average and its RS line is near highs after a nice rally in the past year. But Friday's stock tumble shows that some stocks can hold up well in a bad market until they suddenly don't. Paychex stock's 139.07 buy point is still valid, though it could form a new, short consolidation as well.
The stock has a 92 RS Rating and an 86 EPS score.
Rising inflation is driving people back into the workforce, Paychex management told CNBC in February.
That should give a boost to Paychex earnings, which benefited from pandemic demand for HR advice.
Target Stock
The big-box retailer carved a cup base with a 269.08 buy point. For now, Target stock remains well below the entry but a recent rally helped it regain the 10-week average, which remains below the 40-week line, a sign of recent struggles. It's possible TGT stock is starting to work on a handle.
The RS line for Target stock is improving after moving sideways in the past year.
Target bears an 84 RS Rating and an 88 EPS Rating.
The company has seen pandemic tailwinds ease but Target earnings still jumped 20% in its latest quarter, with sales up 9%. During the pandemic, Target and other so-called essential businesses stayed open during lockdowns and earnings boomed.
Rising prices have scared away shoppers. But Target stock could be a retail play for inflationary times. Its motto is "Expect more, pay less."
One concern is that while Target is starting to outperform the market, it's lagging several other discounters, including Costco Wholesale, Dollar Tree and Walmart.
Bears Hunt Down Market Bulls; What To Do Now
Lockheed Martin Stock
The defense contractor continues to work on a 480.09 flat-base buy point. Lockheed stock is testing support near the 10-week average, but remains above that key level for now.
Investors could use Tuesday's high at 475.50 or a bounce off the 10-week line as an early entry. But a move back above the 21-day average would be a really good sign/confirmation of strength.
The RS line for Lockheed stock has rallied so far this year after a slide for much of 2021.
Lockheed Martin has a 90 RS Rating and 83 EPS Rating.
In an earnings call on April 19, Lockheed said it's in talks with the Pentagon about raising weapons production for Ukraine, after the Russian invasion. It hasn't raised production yet.
LMT stock backed away from the buy point after weak earnings and a conservative outlook.
For more great stock ideas, check out IBD's proprietary watchlists, like the IBD 50 and the IBD Big Cap 20.
