The GICS Consumer Staples Sector (ASX:XSJ) includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products. It also includes food & drug retailing companies as well as hypermarkets and consumer super centers.
As this business sector is less sensitive to economic cycles, the XSJ Index has less suffered this year compared to other indices like Materials or Financials.
The weekly chart shows that the XSJ price action has almost retraced 61.8% (point C on the chart) of the bullish trend occurred during 4 years and a half, between March 2003 and December 2007 (points A and B). The historical high posted in last December was at 9,233 points while the recent low has been posted just at 5,995 points. It’s “only” a decline of 35%.
It is likely that the Index will now rebound on this support level, which is roughly a zone of buying interests between 5,900 and 6,000 points. The price action had already bounced back on previous intermediary support levels which corresponded to Fibonacci retracement ratios (points D and E).
The MACD is following the Commodity Channel Index which has already rebounded since October 10. It means that the Index has reached an oversold bottom point. The MACD is curving upward and a cross above its signal line would be a confirmation of a trend reversal. A further rebound is therefore expected.
What could be the next objective for the price action?
As the chartist indicators argue for a technical rebound in a current bear market, the upside potential is actually limited. The bullish momentum that may build up should drive the price towards the main resistance level which is valid since last December.
Indeed, this resistance level joins the lower highs successively posted during those past 10 months (points B, F, G and H on the daily chart). This level is currently around 7,100 points.
Yesterday the Index closed at 6,257 points. It means that a rebound of roughly 12/13% is likely in the coming weeks.
On the downside, a move which would drive the Index below the support level of 5,900 points would generate a new bearish momentum.
Good Investing,
Gabriel
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