Watch For The Rotation Into Consumer Staple Stocks

May 18, 2011 Add Investopedia to Safe Sender List
Watch For The Rotation Into Consumer Staple Stocks

Find Investopedia on Investopedia On Facebook Follow investopedia on Twitter

Commentary: Recently, there has been a subtle rotation into consumer staple stocks as the markets have encountered selling the past few weeks. Beyond this, large cap stocks have also been outperforming sectors such as small caps and technology. This is typical behavior for periods of weakness as money rotates to the safer sectors. Safer typically means lower volatility and a larger dividend. While I am of the opinion that the markets have not topped yet and could have more upside, it is not a bad idea to have some of these staple stocks on your watch list for the summer trading season, which is often a period of underperformance.

One staple stock that has been performing quite well over the past year is Coca-Cola (NYSE:KO). KO had been consolidating gains from late last year into 2011, until breaking out in late March. It has since settled into a base-on-base consolidation, holding above the breakout area near $65.75. KO has shown very little weakness throughout the past few weeks and is worth watching as a possible trading vehicle during the summer. (For more, see A Guide To Investing In Consumer Staples.)

Source: StockCharts.com

Fortune Brands (NYSE:FO) is another consumer goods stock that has shown relative strength recently. It also cleared a base late in March, and has held above it since then. It has been trading in a tight range near $64 and its 50-day moving average is rising toward its current price. Traders should monitor the $62 area on any weakness as a possible support level, but it looks like FO is already starting to drift higher.

Source: StockCharts.com

Mattel (NasdaqGS:MAT) is another stock already above its prior base. The popular toy maker didn’t clear its base until mid-April, and then gave up a huge portion of its post-gap gains that same day. However, it has since settled into a tight trading range while holding above the breakout level near $26. While one more dip to test the breakout can’t be ruled out, MAT has held up very well in light of the recent market weakness and should be watched on any strength above $27. (For more, see Channeling: Charting A Path To Success.)

Source: StockCharts.com

Another consumer goods stock that hasn’t broken out yet but remains worth watching is Movado Group (NYSE:MOV). MOV did clear a trading range it was following within the larger overall base on a large gap in April and has held near its highs since then. The lows set in the recent pullback in May near $15.50 are the area to watch on any weakness, but the real key is to watch for a close above $17, which could lead to much higher prices.

Source: StockCharts.com

The Bottom Line
While there are no guarantees that the markets will continue to see a full rotation into consumer staples, the stocks mentioned above have held up very well in light of the recent market weakness. If the markets do continue to see weakness, it’s possible this group will remain more stable than other, more risky sectors. Many institutions, in particular mutual funds, must remain invested at a certain percentage, and they will continue to rotate to safety if the markets suffer any extended periods of volatility. Sure, they likely won’t perform as well during more aggressive periods in the markets, but traders should keep these stocks on their radar in case the environment continues to weaken into the summer. (For more, see 5 Undervalued Consumer Staple Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

FXtrader - Start trading now Newsletters Find Chart Advisor Useful?

Check out our other FREE newsletters!

• Investing Basics
• Forex Weekly
• Stock Watch Weekly
• Warren Buffett Watch
• News To Use
• Term of the Day
• Professionals in the Money


Click Here To Subscribe!
 


Have a Great Day!

By Joey Fundora

Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.

At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.



DISCLAIMER
ChartAdvisor is not a registered Investment Adviser or a Broker/Dealer. The trading of securities may not be suitable for all potential users of the Service. You should be aware of the risks inherent in the stock market. Past performance does not guarantee or imply future success. You cannot assume that profits or gains will be realized. The purchase of securities discussed by the Service may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities, or making any investment decisions. You assume the entire cost and risk of any investing and/or trading you choose to undertake.

To prevent this email newsletter from getting swept up by an overzealous COW filter, please add our "From" address (support@chartadvisor.com) to your address book. Comments? Send us an email to support@chartadvisor.com

You are currently subscribed to chartadvisor-free as: duitlumbung@gmail.com
To unsubscribe or change your email settings, Click Here

0 komentar:

Texts

Diberdayakan oleh Blogger.

Popular Posts

About Me

Followers

Blog Archive