By Doug Busch

The consumer discretionary group displayed notable strength last week. The Consumer Discretionary Select Sector SPDR ETF gained 1%, making it the best-performing sector among the 11 S&P groups. This advance came despite weakness in several top-10 holdings, as Home Depot and Nike declined 4% and 13%, respectively. Nike's drop marked its worst weekly performance since late June 2024, highlighting ongoing pressure in athletic apparel. Footwear peer Adidas has also struggled, now trading 30% below its most recent 52-week high.

The overall strength was also notable given Friday's disappointing Michigan Consumer Sentiment reading. The XLY ETF is holding just above a potential double-bottom pivot near $121.60. Bulls will be watching closely for signs of firmness during the holiday-shortened week ahead, particularly after the final three sessions last week all closed near the lows of their respective daily ranges.

Many will argue that pockets of froth have emerged among consumer stocks, which could serve as a cautionary signal. Several names have posted outsized moves, including Fossil Group, which doubled between mid-November and early December. Stitch Fix surged roughly 20% during the first week of December and has since carved out a cup-with-handle pattern. Eastman Kodak has also doubled from its mid-August lows, peaking near the very round $10 number after printing a bearish evening star pattern on Dec. 10.

But the group's strength has been evident for longer than just last week, as it is also the best performing major S&P sector over the past month, up nearly 9%. Consumer discretionary offers more than just Tesla and Amazon, the two largest holdings in the XLY ETF, and warrants a closer look. Below are three compelling charts that highlight this underlying strength.

Gap, a retail comeback story, is having a solid 2025 up 18% year to date, solid relative strength doubling the advance of the XLY. It is approaching the familiar round $30 number for the fourth time since the first quarter of 2024.

The stock has been a solid outperformer versus consumer peers on a relative-strength basis since the start of the fourth quarter, gaining roughly 24% over the past three months following a bounce off the very round $20 number. The 200-day simple moving average is trending higher, underscoring improving longer term momentum, and the shares are now sitting at a cup-with-handle pivot near $28.07. This base began off the April lows which delivered a 72% advance into late May. A breakout here targets a move toward $39 by the second half of 2026, representing approximately 39% upside from current levels. The bullish thesis remains intact as long as the stock holds above $25.50.

Gap traded around $27.50 Monday.

Five Below is continuing a pattern set by other discount retailers. It is trouncing peers up 73% year to date and is higher by more than 250% off the April lows. Rivals Walmart is just 3% from its most recent 52-week high, Target has fallen just two sessions all month. Dollar General is up 35% over last month. Dollar Tree, Ross Stores, and TJX are all acting well too.

Five Below has recorded five consecutive positive earnings reactions. It recorded a bullish island reversal on April 23, after the gap down on April 3. Note how its 21-day exponential average started tilting higher then as well. It has now formed a bull flag pattern. Enter above $185 and look for a move toward $227 by mid 2026, which would represent a gain of 25% from current prices. Remain bullish above $167.

Five Below traded around $187 Monday.

Revolve Group, an online fashion retailer, is down 13% year to date, but has gained 25% over the last three months. It is on its first five-week winning streak of the year, with all five weeks closing at highs, a very bullish sign.

The stock continuously bounced off the very round $20 number since the summer. Bulls are surely admiring the gradual slope higher of the 200-day simple moving average. Since the start of November it broke above an eight-month downtrend against the XLY and has now formed a bull flag and a break above a $29 pivot. The stock could see a move toward $38 by mid 2026, representing a 31% gain from current prices. Remain bullish above $27.

Revolve Group was trading around $29.50 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

December 22, 2025 12:08 ET (17:08 GMT)

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