Eli Lilly (LLY) and Albemarle ALB stock is topping the watch list for stocks that have shown resilience in the sell-off this weekend and may be ready to lead the way forward if market conditions improve. Together with LLY and ALB stock, dollar tree (DLTR), Cigna (CI) and world wrestling entertainment (WWE) Completes a list of stocks that offer some potential upside and some protection from economic risks today.
All stocks have relative bullish strength streaks, indicating that they are outperforming the S&P 500. To some extent, all stocks, except Eli Lilly, have been below expectations for some time, but now they seem to be upping their game.
An emerging rally that started with a rally from Thursday’s lows and a strong advance on Friday still has to establish itself on a follow-up day. However, even if it did, investors probably wouldn’t want to be cautious in the wind. The latest CPI inflation data confirms that the Federal Reserve still has some business left in order to dampen demand sufficiently without stifling economic growth.
In other words, don’t expect to flip a switch that reignites fallen favourites, whose schemes are so badly damaged that they lack clear entry points. There is a good chance that the qualities that supported the stock watchlist will continue to be in demand this weekend.
Eli Lilly earned a spot on the IBD 50 major stocks list, as well as the IBD Leaderboard Portfolio. WWE stock and DLTR recently joined our Watch Leaderboard.
Eli Lily Stock
Eli Lilly, who was IBD stock for the day on Wednesday, has set up since it easily beat first-quarter estimates on April 28. However, the big news of the day was the release of Phase 3 data for the obesity drug tirzepatide, showing patients lost 16%-22.5% of their body weight, depending on dose size.
After earnings, Wells Fargo analyst Mohit Bansal raised his target LLY stock price to 305 from 280, with an equal weight rating. The analyst said he expects sales growth of 11% and growth of 21% in earnings per share from 2022 to 2027, putting Eli Lilly in the top tier of biopharmaceutical companies.
On Friday, LLY stock partially closed at 291.63, just above the 50-day line. Eli Lilly did not participate in Friday’s big market rebound, led by the defeated tech companies. But as a defensive growth name, LLY stock has held up in the past few weeks despite heavy selling in the market.
Eli Lilly stock has 314.10 buy points from a flat base within a base on base pattern. With that said, a strong move above the 50-day line that breaks the downward-sloping trendline from the April 7 high would be actionable.
Albemarle sold off hard after issuing disappointing earnings guidance on Feb. 16, despite the rise in lithium prices. Investors seemed impatient with rising costs, production restrictions and tied contracts at prices well below market levels.
But Albemarle fixed the ship with its first-quarter profit exploding on May 4, thanks to renegotiated contracts. Albemarle raised its 2022 EPS target to $9.25-$12.25 from $5.65-$6.65 previously.
While prices of other metals are dropping amid a more subdued economic outlook, lithium prices appear to be more certain, amid expected longer-term supply shortfalls.
On Friday, ALB stock jumped 7.2% to 228.82. The past two sessions saw ALB stock bounce off the 50-day line and reclaim its 200-day moving average.
A break above the May 5 high at 243.18 could provide a speculative entry point, as a matter of fact less true. A break above 248, where ALB stock has stalled twice, including before the disappointing fourth quarter report, will provide a clearer green light.
dollar tree stock
Dollar Tree is a defensive hash game well suited to dealing with the current sluggish and hyperinflationary economy. She has also successfully managed cost pressures, implementing her plan to raise the price of several items to $1.25.
However, DLTR stock has been a long-term underperformer until very recently, which is mostly attributed to its acquisition of Family Dollar.
But investors appear to be gaining confidence in Dollar Tree’s outlook after the company reorganized its board of directors in March and named former Dollar General CEO Rick Drilling as CEO. After the move, Loop Capital analyst Anthony Chucumba upgraded DLTR stock to buy from hold, increasing its target to 200 from 140. He wrote that Drilling would “dust off the general dollar game rules.” In Family Dollar.
DLTR stock broke out and rose about 18% on the move, but has since fallen back to the 50-day streak. A strong rebound above the 50 day line, and a break above the downward sloping trend line, will be actionable. Dollar Tree stock may have a flat base in another week.
Cigna stock only late joined this year’s rebound among managed care stocks. The group has done well amid lower Covid costs and overall health costs.
However, Cigna has underperformed in the long run since its acquisition of Express Scripts, a prescription benefits management company.
But now Wall Street is starting to see value. The boom in the biosimilars market that is expected to rebound next year looks like a tailwind. Shrinking Medicaid listings may hurt other insurers as the pandemic emergency ends, but Cigna could benefit through its commercial focus.
Cigna stock has carved a handle-cup pattern for a year and is now about 4% below a buy point of 270.07.
In early April, World Wrestling Entertainment announced that WrestleMania 38 was the highest-grossing and most-attended event in the company’s history, with 156,352 visits to AT&T Stadiums in Dallas over the course of two days.
The return of live events provides some protection against consumer weakness. After better-than-expected first-quarter results on May 5, Benchmark analyst Mike Hickey said “now is the time to buy” WWE stock. He expects its content to attract many new bidders next year for deals that will go into effect in 2024.
WWE stock rose 1.6% to 58.25 on Friday. The stock is down 9% from 63.81 buying points after finding support at the 200-day line last week. However, a strong move beyond the 50-day line, and a break of the trend line, would provide an early entry point.
The steady base of WWE stock is next to several failing bases, but their relative strength streak has improved to an 11-month high.
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