Why The Turn In Consumer Staples Could Be Real
Dragonfly Capital | Oct 26, 2016 08:39AM ET
Consumer Staples Select Sector SPDR (NYSE:XLP) stocks, those of companies whose products you use every day like Procter & Gamble Company (NYSE:PG) and Clorox Company (NYSE:CLX) had a solid run higher from the 2009 low.
They continued to rise almost uninterrupted until the beginning of 2015. That is when they changed character to a sideways consolidation. They dipped in August when the market swooned and then quickly recovered to the consolidation zone where they churned until February.
After February though they started higher again. They reached a peak in July and then started a pullback. No mere consolidation this time. the pullback has lasted almost 4 months at this point. But the last couple of days may be showing signs that the worst is over and Consumer Staples are ready to move higher.
The first thing to note is that the ETF that tracks Consumer Staples (XLP) had found support at the 200 day SMA to start September. It gave up that support at the beginning of October and it became resistance, with additional horizontal resistance at 52.50.
The pullback now found support at a 50% retracement of the last move higher. The ETF jumped up from that that Tuesday and is sitting just beneath the 200 day SMA. As it does the RSI has tuned up and is moving over the mid line. The MACD has also crossed up and is rising.
There are 3 things to watch to confirm if the Consumer Staples are ready for another run to the upside. First is continuation of the RSI over 60 into the bullish zone. The second is the MACD moving up into positive territory. The third and most important is the price moving up over 54. Until then it is a good start.
DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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