Companies in the consumer staples sector has received much attention in recent months due to the strong increase in demand, fueled by the fears of the coronavirus pandemic. As a lot of people in the population watched some of the stocks of goods, active traders focused their attention on stocks in the consumer staples sector, think that the increased demand would send stock prices higher.
Based on the maps discussed below, the price did bounce back strongly with the rest of the market. However, the movements of the risk tolerance indicated on the graphs suggests that, even in relatively stable sectors such as consumer goods are struggling to maintain the upward trend.
Consumer staples Select sector SPDR Fund (XLP)
Active traders who are looking to get an idea of where a specific sector is led often turn popular exchange-traded products, such as the Consumer staples Select sector SPDR Fund (XLP). As the fund name suggests, managers attempt to provide investment results that correspond generally to the price and yield of the Consumer staples Select Sector Index. More specifically, the fund’s 33 holdings are companies that are doing business in the food and staples retailing, beverages, food products, tobacco, household products and personal industries in the united States.
Taking a look at the chart below, you can see that the commercial fund, the long-of a clear curve trend upward until the distribution earlier this year. The strong rally in recent weeks has resulted in some traders talking about a continuation of the upward trend, but it is important to note that the share price close to the combined resistance of the 200-day moving average and the dotted trend line. The failure of the attempt to move above the psychological $60-mark and clear resistance shown by the 200-day moving average and horizontal of the curve suggest that the bears are still in control of the dynamics.
In addition, the followers of technical analysis will probably use this proximity resistance bearish crossover between the 50-day and 200-day moving average (represented by the blue circle) to the signal of the next stage of a longer-term downward trend. Bullish traders may want to stay away until the price is able to notch several consecutive years of closing above the resistance or other key technical indicators turn positive again.
The Procter & Gamble Company (PG)
As the top of the holding of the XLP ETF, The Procter & Gamble Company (PG) should be of particular interest to active traders. As you can see on the chart below, the break below the 200-day moving average, which was fought with a good amount of buying pressure, has triggered a bearish crossover between the long-term moving averages. This signal puts the long-term momentum in favor of the bears, and will probably be close to the resistance levels of guides at the time of placing the buy and stop orders.
The Coca-Cola Company (KO)
The Coca-Cola Company (KO) is another top holding of the XLP ETF, and on a global scale, it is one of the best companies in the consumer goods sector of the base. With much attention given to the portfolio of Warren Buffett over the last few days, many traders will be watching Berkshire Hathaway key holdings such as Coca-Cola.
As you can see below, in March sell-off triggered a bearish crossover between the 50-day and 200-day moving averages, which could be used by followers of the technical analysis to mark the beginning of a long-term downward trend. In addition, the recent trends towards the 50-day moving average will be of particular interest over the next few days, because it also suggests that the bears are still in control and that the momentum generated by the rebound may be ending.
The Bottom Line
March, the surge in demand for certain consumer goods products has many traders wondering whether the sector would be to go against the market in general. Based on the maps discussed above, it is clear that the bulls have their work set up to get the trend back on track. Nearby resistance levels and long-term technical sell signals suggest that bears are in control and that the next step in a long term downtrend is underway.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.