The Consumer Staples Select Sector SPDR (XLP) -- it's not your father's ETF. In a way, it kinda is. It's full of fiber, smokes and toilet paper. All right, so maybe I'm exaggerating a bit, but when I ran a bullish scan this morning that has been pretty consistent at identifying breakouts, it returned names like Altria (MO), Colgate-Palmolive (CL), Walgreens Boots Alliance (WBA), Kimberly Clark (KMB), Kellogg (K) and General Mills (GIS). It took my brain about two seconds to hone in on XLP.
If you are an investor comfortable with individual names, I will say CL and WBA have the best individual daily charts; however, if you are looking for a core position without the big gap risk associated with individual names, then XLP is the more conservative way to go. You'll still have the influence of the underlying names as the ETF is beholden to additional names like Procter & Gamble (PG) along with Coca-Cola (KO), but these aren't exactly high-beta names. (Walgreens Boots Alliance is part of TheStreet's Action Alerts PLUS portfolio.)
Looking at the daily chart of the XLP, you'll see we are running near the top of a rising wedge pattern, but above the recent bullish flag. The two areas of support are $51.65 and $51. My focus would be on the latter. Call strikes should be targeted there or protective puts for anyone in the options market. If I were buying the ETF straight up, I would want to give myself a little more room given the recent run and not look to stop unless we dropped under $50.85 on a closing basis. The one concern here is that the secondary technicals, while strong, are not breaking out with price.
Based solely on the daily look, I would target the individual names of CL or WBA here or wait for a pullback into the $51.65 for XLP. While I like the look of the sector, the fact that all the names are moving together worries me that we could have a tail wagging the dog here, so any rotation in the market is going to hit names not clearly breaking out. I'd stay with the strongest two or three, as they should find the highest levels of support due to the recent breakout.