Tuesday’s ETF Chart To Watch: Consumer Discretionary Select Sector SPDR (XLY)

by on August 28, 2012 | ETFs Mentioned:

With no major economic data releases or announcements to kick off the trading week, major equity benchmarks oscillated around the flat line for most of yesterday. The NASDAQ managed to clinch a gain on the day while the Dow Jones Industrial Average and S&P 500 Index both sank lower thanks to Apple’s robust performance; shares of the tech giant hit all-time highs around the $680 mark as investors rejoiced over the company’s win in court over Samsung. Looking ahead this week, investors will digest the latest U.S. GDP revision on Wednesday as well as Chairman Bernanke’s speech at Jackson Hole on Friday [see also ETF Insider: Bulls Look To Data Before Resuming Rally].

Investors will keep their focus on the homefront later today as August consumer confidence data comes out. As such, our ETF to watch for the day is the State Street Consumer Discretionary Select Sector SPDR (XLY, A) which could see an increase in trading activity following the latest confidence index release. Analysts are expecting for consumer confidence to come in at 66, marking only a modest improvement from last month’s figure of 65.9 [see also Will Hurricane Isaac Send UNG Soaring?].

Chart Analysis

XLY has been drifting sideways with an upward bias throughout the month of August thus far. This ETF is undoubtedly in an uptrend, although it has been struggling over the past three months to regain the same level of bullish momentum that drove it higher from the start of 2012 up to its recent peak at $46.27 a share on May 1, 2012. Since correcting lower in mid-May and early June of this year, XLY has managed to resume its upward trajectory along a steadily rising support line (bottom blue line), showcasing its resilience as it has managed to hold above its 200-day moving average (yellow line) [see also 17 ETFs For Day Traders].

Click To Enlarge

Conservative investors looking to get in long at current levels should hold off a bit seeing as how XLY is trading near the upper-half of its price channel (blue lines), which suggests that a short-lived correction in the near future could provide a more attractive entry point [see also ETF Technical Trading FAQ].

Outlook

If consumer confidence comes in better-than-expected, XLY may have the wind at its back for the day; in terms of upside, this ETF has potential resistance at $46 a share. A disappointing data release could drag the discretionary sector lower, however. In terms of downside, this ETF has support at $44 a share followed by the $42.50 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb Pro]

Disclosure: No positions at time of writing.