The recent pullback in consumer discretionary stocks presents a buying opportunity, according to analysts at Fairlead Strategies. The sector represented by the Consumer Discretionary Select Sector Fund SPDR (XLY) is currently within its cyclical bull trend.
The firm believes the rebound has already begun and is likely to continue in the near future, fueled by countertrend gains in Tesla (NASDAQ:) shares. Minor resistance is seen around $180 and more significant resistance is seen around $185 from the March high. Key support for XLY is around $170.
Despite the recent downtrend relative to the S&P 500 (SPX), Fairlead Strategies suggests using the pullback to increase exposure to consumer discretionary stocks emerging from correctional phases.
Some of the most notable companies include Carnival Corporation (NYSE:), Ross Stores (NASDAQ:) and Constellation Brands (NYSE:). Analysts advise maintaining existing positions in stocks with a strong uptrend, such as Colgate-Palmolive (NYSE:), Chipotle Mexican Grill (CMG), Costco (NASDAQ:), Deckers Outdoor (), Garmin (NYSE:), Royal Caribbean (NYSE:), TJX Companies (NYSE:), Tractor Supply (NASDAQ:) and Walmart (NYSE:), awaiting potential declines to add new risks.
For stocks showing a long-term reversal or counter-trend movement, such as eBay (NASDAQ:), General Motors (NYSE:), Kimberly-Clark (NYSE:), Nike (NYSE:) and TSLA analysts recommend maintaining positions, but managing risks using stop-loss strategies.
They also suggest keeping an eye on rising oversold stocks near support, such as Airbnb (ABNB), Home Depot (NYSE:), Lowe’s (NYSE:), Marriott (MAR) and Target (TGT).