With many stocks stuck in a dead zone, is it time to consider the Consumer Staples sector, comprised of stocks analysts call ‘ Defensive' plays?
XLP, the ETF based on the Consumer Staples sector (Consumer Staples Select Sector SPDR), looks ready to break out to new all-time highs:
But you get a different picture when you look at XLP's ‘seasonal chart', the track record of movement in prior years. Not once in XLP's 15-year history has it had a gain over next 4 weeks.
What are the top holdings in XLP? From finance.yahoo.com we see:
I went through each of these stocks, checking fundamentals, technical setups, and seasonal patterns. The results were uninspiring. Every stock has mediocre-to-declining fundamentals, P/E's right near the top of their 5-year ranges, and Up/Down Volume Ratios between 0.8 and 1.1 (above 1.1 typically indicates accumulation, and below 1.0 indicates distribution). Every stock had a lackluster seasonal chart, meaning there is little evidence institutions accumulate these stocks this time of year. Colgate-Palmolive (CL) is the only one that had an encouraging chart pattern for a new long stock trade.
This may be the year XLP finally records a gain over the next 4 weeks. It looks ready to break out. But only a few of its top 10 holdings are helping XLP to rise. Considering all the other evidence, the odds are any breakout will be weak and short-lived.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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