Consumer Staples Look Oversold But Trend Remains Solid by Eric Bush, CFA
It only took about six weeks for North American consumer staples stocks to go from short-term overbought to short-term oversold. On July 20th, 88% of DM Americas consumer staple stocks were trading above the 50-day moving average. As of the end of last Friday, just 18% were trading above the 50-day moving average. This is the fewest number of stocks trading above the 50-day moving average since late January.
The good news for investors in this space is that both trend and momentum look OK. The trend looks solid on a relative basis. DM Americas consumer staples have outperformed the overall DM equity index by nearly 60% over the past ten years on an equal-weighted basis. Granted the last two months have been rocky as DM Americas consumer staples have underperformed by about 10%. However, the overall relative trend looks like it is consolidating rather than breaking down.
If we turn to momentum, we can see that 86% of DM Americas consumer staple stocks still have the 50-day moving average trading above the 200-day moving average. This will probably fall back in the coming weeks as prices consolidate but it is a good indicator that the overall momentum of the group is positive.