Lithium battery stock Livent, Chevron and Northrop Grumman rank among this week's top stocks to watch, as they outperform near buy points in a challenging market. Valaris and World Wrestling Entertainment also make the cut.
Livent stock, a lithium producer and Tesla supplier, and these other top stocks share two winning traits while the broader stock market at fresh lows.
One, each shows a relative strength line making bullish new highs on the weekly chart. Two, each sported an IBD Composite Rating of 90 or better as of Thursday's close.
Investors should be careful about making new purchases as the stock market continues to search for a direction. But it's always a good time to build watch lists for the next uptrend.
IBD Live: A New Tool For Daily Stock Market Analysis
Stock Market Action: Watch The RS Line
On a weekly MarketSmith chart, the RS lines for LTHM stock and its peers all hit bullish new highs this week, indicated by a blue circle at the end of their RS lines.
A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
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.
Winning Composite Ratings
The best growth stocks have a Composite score 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.
All the stocks to watch this week meet that bar. Lithium battery stock Livent and Chevron lead with a perfect Composite Rating of 99 each. They are followed by World Wrestling Entertainment with a 96, Valaris with 92 and Northrop Grumman with 90.
Livent Stock Tied To Lithium Batteries
Tesla battery supplier Livent rallied in two of the last three weeks, regaining its 10-week and then its 40-day moving average. The rally has taken LTHM stock to its highest level this year.
The rally also saw Livent stock carve the right side of a messy cup-shaped base with a 33.14 buy point. Investors could use 29.68 — a dime above the May 5 high — as an aggressive entry. LTHM stock briefly topped the early entry Friday, then reversed as the major indexes tumbled to 2022 lows.
For now, the lithium battery stock remains a little below the early entry and well below the traditional buy point.
But it's worthy of a stock watchlist: The RS line for Livent stock is making a new high after a strong rally over the past two years, according to MarketSmith chart analysis. That strength indicator is also hitting all-time highs, rising above the high pegged in November 2018 high.
The LTHM stock chart would look better with some tighter action, perhaps forming a true handle. Ideally, shares would flash a buy signal as market conditions improve.
Livent stock shows an IBD Relative Strength Rating of 96 out of 99. That means it has outperformed 96% of all stocks in IBD's database over the past 12 months.
It's also backed by a strong EPS Rating of 75 out of 99. In early May, LTHM stock rocketed after delivering strong quarterly earnings and guiding higher. Sales growth accelerated for a second straight quarter.
Previously in November 2020, lithium stock Livent soared on a supply deal with Tesla. The adoption of electric vehicles has quickened since then, with several automakers besides Tesla now looking to lock up lithium supplies for EV batteries as shortfalls loom.
Warren Buffett Likes Chevron Stock, Oil Stocks
Shares of oil major Chevron rallied in recent weeks, pegging all-time highs after coming off late April lows. The rally saw Chevron form the right side of a flat base with a 174.86 buy point. Chevron briefly topped that entry on Monday, then fell back to its 50-day line before rebounding to close off 5 cents at 167.88.
Still, the relative strength line for CVX stock is making a new high on the weekly chart. The RS line has bolted higher this year as the Russia-Ukraine war fuels oil prices to eight-year highs. In fact, it's at roughly two-year highs though below all-time highs.
Chevron earns an RS Rating of 98 and an EPS score of 78. Wall Street expects Chevron earnings to nearly double this year as sales jump 35%. Revenue growth ranged between 70% and 179% the last four quarters, an impressive rebound from the plunge in 2020.
Integrated energy giants like Chevron benefit from higher crude oil and natural gas prices, but also from sky-high refining margins.
Value investing legend Warren Buffett's betting on the energy patch, too. In Q1, Warren Buffett massively increased his stake in CVX stock while also beefing up Occidental Petroleum.
Northrop Grumman Stock Gets Ukraine Lift
B-2 bomber maker Northrop Grumman offers a 477.36 buy point from a cup-with-handle base, which formed after shares peaked in March. Investors could use 463 as a down-sloping trendline entry. They could also use 470.33, a dime above the May 5 high, as an alternative early entry.
Right now, NOC stock needs to reclaim its 50-day and 10-week lines, after falling 2.1% to 443.33 last week.
Defense stocks surged following Russia's invasion of Ukraine in February, on expectations for higher defense spending by Western powers. On Wednesday, IBD chose NOC stock as its Stock Of The Day as it sets up near a buy point.
The RS line is making a new high on the weekly chart. It surged after the Feb. 24 invasion of Ukraine.
The stock has a 94 RS Rating and a 69 EPS score. Northrop earnings and sales fell in recent quarters and are expected to see some further weakness before a return to growth in the third and fourth quarters of 2022, according to FactSet.
Northrop Grumman is developing the U.S. Air Force's next-gen intercontinental ballistic missile system, called Sentinel.
Valaris Stock Rises With Oil Prices
Oil-and-gas drilling services provider Valaris flaunts an ascending base, an especially bullish pattern in a bad market, with oil prices at multiyear highs. That made VAL the Stock Of The Day Thursday.
Valaris stock eyes a 61.60 buy point after a huge rally in the past year. The relative strength line has shot to fresh highs with VAL stock, a sign of outperformance in the current weak market.
Shares fell 2.7% last week to 55.98.
VAL stock bears a 99 RS Rating and 61 EPS Rating. In its latest quarter, Valaris widened losses by seven cents to 51 cents per share as revenue rose 4% to $318 million.
Analysts polled by FactSet forecast Valaris will swing to earnings of 93 cents in 2022 as sales leap 20%. In 2023, they project Valaris earnings will vault 350% as sales growth accelerates to 25%.
Valaris has a long-standing partnership with Saudi Aramco, the world's largest oil producer. It expects to benefit from Saudi Arabia's expansion in the offshore market, which will create major demand for drilling services. Most of the country's current oil and gas production comes from onshore drilling.
World Wrestling Entertainment Stock
Shares of the pro wrestling promoter found recent support at the 40-week moving average.
WWE stock went on to rally 4.6% to 60.91 last week, just above its 50-day and 10-week line. It's getting close to a 63.81 buy point from a flat base, according to MarketSmith analysis. World Wrestling Entertainment stock is sitting right on a downward-sloping trendline. A rise above Friday's intraday high would offer an early entry.
The relative strength line for WWE stock shows a new high on the weekly chart. It fact, the RS line has risen to a nearly two-year high, though it's far below all-time highs.
World Wrestling Entertainment has a 92 RS Rating and a 98 EPS Rating. The live entertainment giant handily beat earnings expectations in its latest quarter. In 2021, it topped $1 billion in annual revenue for the first time.
The return of live events after the pandemic hit, as well as streaming deals and international expansion, bolstered WWE's outlook.
For more great ideas like lithium battery stock Livent, check out IBD's proprietary watchlists, like the IBD 50 and the IBD Big Cap 20.
