Shares of the Consumer Discretionary Select Sector SPDR (XLY) ETF pulled back nearly 5% from the all-time highs that were hit earlier this month. Now large components, like Amazon.com (AMZN) and Ford (F), are starting to catch a bid following the recent market weakness. At a P/E ratio above 18 times this year’s earnings the (XLY) isn’t cheap, but the momentum remains with the bulls that are picking up shares of Lowe’s (LOW), Starbucks (SBUX), and many others.

TECHNICAL ANALYSIS OF CONSUMER DISCRETIONARY ETF (XLY)

In light of the minor correction, the (XLY) hasn’t closed lower for three straight weeks in over a year and it doesn’t look like the streak will be snapped anytime soon. On the weekly chart, the ETF is in a well-defined uptrend that started back in November. Since then it has only tested support (bottom of the channel) three times and on the fourth test it’s once again setting up for a low risk buying opportunity. 

 

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CONSUMER DISCRETIONARY SELECT SECTOR SPDR (XLY) OPTIONS TRADE

Buy the (XLY) Sep. $58 Call for $1.25 or better

Stop loss- $0.90

Upside target- $3.00