By Doug Busch

The consumer staples sector showed renewed strength last week with the State Street Consumer Staples Select Sector ETF gaining 2% and finishing at the top of its weekly range. The ETF also closed nearly 4% above its intraweek low.

This type of price action reflects strong buying pressure, likely institutional participation, and resulted in a bullish candlestick. Importantly, the move was accompanied by the third-highest weekly trading volume since mid 2022. While some may view this surge in a traditionally-defensive sector as an ominous signal, it more likely reflects broader participation across equity markets.

Taking a longer-term view of the monthly chart adds important context. Over the past decade, the sector has touched its 50-month simple moving average only five times. Each occurrence marked a point of support and was followed by a bullish candlestick formation.

In June 2018, a bullish morning star pattern launched a six-month winning streak. A bullish piercing line in January 2019 preceded gains in 10 of the next 12 months. In April 2020, a bullish engulfing candle kicked off a 13 of 21 month advance totaling roughly 34%. A bullish morning star in November 2023 led to gains in nine of the following 11 months.

Last November marked the XLP's fifth test of the 50-month moving average. It again registered a bullish engulfing candlestick. History suggests this setup has been a reliable signal of durable upside, reinforcing the case for a sustained move higher into 2026.

The relative strength picture supports that view. Since Covid, the XLP has underperformed the S&P 500 on the ratio chart. Since 2011, whenever the ETF finished a calendar year in the bottom three of the 11 major S&P 500 sectors, the subsequent year saw strong performance. This occurred in 2013, 2017, and 2024, with the XLP delivering double-digit gains each time. In 2022, when the ETF finished flat this was still a material outperformance of the S&P 500, which declined 18%.

Stock selection within the sector is already beginning to matter. Several notable names have posted decisive moves in recent months. Estee Lauder has surged roughly 135% from its April lows and recently broke above a bull flag pivot near $110. This development opens the door for a potential advance toward $135 by mid 2026. a gain of about 23% from current prices. Herbalife has more than doubled since Halloween, while Vita Coco, a recent stock pick, has gained more than 50% since August.

Two large-cap consumer staples could play an outsized role in shaping the sector's direction in the year ahead.

Target, the discount retailer, has had a challenging year, dropping 25%. The stock has rebounded strongly over the past three months however, advancing 23%. It has shown relative strength versus the benchmark XLP ETF since December. Adding to its appeal, the stock offers an attractive dividend yield of 4.3%.

On the daily chart, the 200-day simple moving average is beginning to flatten for the first time in over a year. The stock has been riding its 21-day exponential moving average higher since breaking above it in late November. Round number theory came into play with the recent breakout above a double bottom pivot at $99.59 on Jan. 2. TGT is currently on a seven-week winning streak, its first since January 2024. An entry point at $104 makes sense, with upside toward $137 by the second half of 2026, representing roughly 30% gains from current levels. Maintain a bullish outlook as long as the stock holds above $96.

Target was trading around $105 Monday.

Coca-Cola has gained roughly 15% over the past year and offers a dividend yield near 3%. Last week, the stock advanced 2% and closed above its 50-week simple moving average after briefly trading below it earlier in the week. Similar reclaim-and-hold moves last February and October were followed by firm upside. Credit the stock for its recent relative strength too, rising about 5% over the past three months while its main rival, PepsiCo, declined 7%.

On the daily chart, the stock jumped more than a combined 4% last Thursday and Friday, snapping a six-day losing streak. Friday's session was particularly constructive, as the stock reclaimed its 50-day and 200-day simple moving averages as well as its 21-day exponential moving average, all in a single session. Momentum now appears to be rebuilding again following the successful gap fill on Sept. 29 from the Feb. 10 session.

I view the stock as buyable here, and add on strength above the double-bottom pivot at $71.42. A move toward $81 by mid-2026 is achievable, which would be a gain of 14% from current prices. Maintain a bullish stance above $69.

Coca-Cola was trading around $70.50 Monday.

Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 12, 2026 11:39 ET (16:39 GMT)

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