Despite the fact that the S&P 500 is sitting at all-time highs, the sector rotation has continued. On Monday, it was the consumer staples sector’s turn to bust a move.
The traditionally defensive consumer staples sector (because its companies’ products tend to be in demand regardless of economic environment) clearly hurdled past a resistance line dating back to May and closed the day near its highs.
On the chart below, note that the Consumer Staples SPDR (XLP) found good support in August and October at its 200-day simple moving average (red line). That ultimately led the ETF to ignite higher through its 50- and 100-day moving averages. Then, on Monday, the Consumer Staples SPDR broke out to a new year-to-date and all-time high.
Plenty of stocks within the consumer staples sector also made nice moves or are toiling with important breakouts. Let’s have a look at three of those consumer staples stocks.
The chart of Procter & Gamble (PG), the largest constituent of the consumer staples sector, looks very similar to that of the XLP and is breaking to fresh year-to-date highs right now. While a quick bearish reversal would need to be respected, so does this PG breakout until proven wrong.
Kraft Foods (KRFT) held its 200-day moving average like a champ in August and early October. Then, on Monday, KRFT rallied nicely into horizontal resistance from the September highs. A break above there could push Kraft stock back toward its year-to-date highs from July around $58.75.
And then there is consumer staples tock CVS Caremark (CVS), which earlier this month also held its 200-day moving average and in recent days has been coiling up just underneath its July year-do-date highs. CVS stock likely doesn’t need a great push to make it break past this tight resistance area.
The bottom line is that, for investors seeking long exposure in the stock market, the consumer staples offer some good stocks to play with defined risk. Any clear bearish reversal day, however, should be taken serious.
Remember, you can always buy any given stock in the consumer staples sector again if and when it looks better.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the “Essence of Swing Trading” eBook by clicking here. At the time of publication, Berger had no positions in the securities mentioned.