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The Consumer Discretionary sector has had a fresh and compelling breakout relative to the S&P 500, Fairlead Strategies founder Katie Stockton told Real Vision’s Trade Ideas.
Within the sector, the Consumer Discretionary ETF, XLY, has broken out on an absolute basis. “That breakout is supported by positive momentum,” Stockton said. “And in the short, intermediate, and long-term, the moving average convergence divergence (MACD), indicators are all positive. So that’s very compelling.”
Drilling down into XLY, Stockton pointed out that big players in the ETF, including Amazon (NASDAQ:AMZN), Starbucks (NASDAQ:SBUX) and McDonald’s (NYSE:MCD), “generally have very favorable charts, long-term uptrends and upside momentum, and the moving averages are generally pointing higher.”
The Trade
Stockton likes buying XLY at current levels of around $124, with a stop-loss after two daily closes below $121.
She has a target price for XLY of $139 over the next six months or longer.
The biggest risk to the trade is if the market loses momentum, she said, but added: “It’s a trending market. So we generally want to have positions, long exposure in outperforming stocks, and also stocks that are in long-term uptrends in absolute terms.”
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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