Sometimes the market is healthy, and other times it’s not. Right now, we’re in the latter environment and it’s creating a challenging backdrop for finding quality stocks to buy. Fortunately, adverse times are when defensive sectors shine.
Traders flock to utilities and consumer staples during times of turmoil thanks to their stability and lower volatility. Because their business models aren’t as sensitive to the economic cycle, recession scares don’t frighten them as much as offensive sectors like technology and consumer discretionary.
I’ve found three consumer staples stocks to buy that are running hot into the new week. They all boast clear breakout patterns that could spell bigger profits to come.
Let’s take a closer look.
Consumer Staples Stocks to Buy: Dollar General (DG)
Source: ThinkorSwim
Most retailers will see customers dry up during the next economic downturn. But, Dollar General (NYSE:DG) probably isn’t one of them. Its performance this year has been nothing short of spectacular. The 49% gain year-to-date has outdistanced the S&P 500 by a country mile.
August’s earnings announcement delivered a massive gap and we’ve since seen the stock consolidating near the highs. With the 20-day moving average now caught up and the 50-day rising closely behind, the time is ripe for DG to push higher.
Resistance near $162 is the line in the sand to watch. A break above it should signal the next advance has begun. Bull call spreads are worth a shot once it happens. Consider buying the Dec $160/$170.
Hershey’s (HSY)
Source: ThinkorSwim
Hershey (NYSE:HSY) is also on pace for a banner year with 2019 gains almost identical to DG at 48%. Its price trend has been remarkably consistent by providing many strong retracement and breakout setups for buyers along the way. HSY stock’s latest pattern is a high base that triggered with Friday’s rally.
With short-term resistance now shattered, HSY should make a run to its 52-week high at $162.20. Quarterly earnings loom later this month and are a wildcard, so position size accordingly.
Implied volatility is running hot ahead of the event at the 70th percentile, so spreads are smarter than buying options outright. The Jan $155/$165 bull call is trading for $4.35 and offers a limited risk way to speculate on additional upside.
Campbell Soup (CPB)
Source: ThinkorSwim
Our final pick suffered a 50% bear market between 2016 and 2018. But 2019 is becoming a turnaround year. The 41% rally in Campbell Soup (NYSE:CPB) has been sufficient in turning its weekly trend higher. The 20-week and 50-week moving averages are now heading northbound.
Turning to the daily chart, every major moving average is now bullish and rising beneath the price. The past month has seen a textbook high base pattern form just under its 52-week high. And with Friday’s rally, CPB stock is now a whisker away from breaking out.
Watch for a break above $47.50 to confirm. Then, sally forth with bullish trades. The implied volatility rank is way low at the 6th percentile making long premium plays quite attractive. Buy the Jan $48 call for around $2.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
