Please ensure Javascript is enabled for purposes of website accessibility

SPDR Consumer Staples (XLP) and SPDR Retail (XRT)

Today Stock Trader’s Almanac Analyst Christopher Mistal recommends a seasonal trade into two sector ETFs that are appropriate for all investors:

SPDR Consumer Staples (XLP) and SPDR Retail (XRT)

Historically speaking, the consumer sector tends to begin its favorable period near the end of September and typically remains strong until the beginning...

Today Stock Trader’s Almanac Analyst Christopher Mistal recommends a seasonal trade into two sector ETFs that are appropriate for all investors:

SPDR Consumer Staples (XLP) and SPDR Retail (XRT)

Historically speaking, the consumer sector tends to begin its favorable period near the end of September and typically remains strong until the beginning of June in the following year. Back-to-school and holiday spending combined with the effects of the “Best Six Months” is the most likely driving force behind this seasonality. More recently, the rising stock market and continued housing and labor market gains (although somewhat sluggish) have given the sector a boost.

Over the last 15 years this trade has produced an average 10.8% gain. Last year’s two ETF trades based upon this seasonality returned an average of 15.9%. Like past years, a two-pronged approach to trade this seasonality will be utilized. We will look to add two consumer-related ETFs to the portfolio that provide exposure to discretionary and nondiscretionary spending on pullbacks over the next few weeks.

SPDR Consumer Staples (XLP) can be bought on dips with a buy limit of $40.00. Employ a stop loss at $36.00 and an auto sell of $48.75. Top five holdings: Procter & Gamble, Coca Cola, Philip Morris, Wal-Mart and CVS Caremark. These names have traditionally been defensive names that have performed acceptably during periods of sluggish growth and should growth accelerate and stabilize at a higher rate, they will also perform. These five names also constitute nearly half of XLP’s total holdings. P&G alone is 14.09% of the ETF’s total assets as of August 5.

SPDR Retail (XRT) can also be purchased on pullbacks using a buy limit of $79.05. Set a stop loss at $71.15 and take profits with the auto sell at $96.35. Top five holdings: GameStop, SuperValu, Conn’s Inc, Asbury Automotive Group and Lithia Motors. Unlike XLP, XRT is widely diversified and these five companies represent just 6.15% of XRT’s total holdings. As of August 5 retail apparel companies were nearly 28.2% of the fund and automotive retail was 13.84%.

Christopher Mistal and Jeffrey A. Hirsch, Stock Trader’s Almanac, www.stocktradersalmanac.com, 800-762-2974, August 6, 2013