Companies within the consumer staples sector received a lot of attention over the past several months due to the sharp rise in demand fueled by fears of the coronavirus pandemic. As many in the population looked to stockpile goods, active traders focused their attention on the stocks in the consumer staples sector, thinking that the surge in demand would send stock prices higher.

Based on the charts discussed below, prices did bounce sharply along with the rest of the market. However, the shifting risk tolerance shown on the charts suggests that even relatively steady sectors such as consumer staples are struggling to maintain the upward momentum.

Consumer Staples Select Sector SPDR Fund (XLP)

Active traders looking to get a sense of where a specific sector is headed often turn popular exchange-traded products such as the Consumer Staples Select Sector SPDR Fund (XLP). As the name of the fund suggests, managers attempt provide investment results that correspond to the price and yield of the Consumer Staples Select Sector Index. More specifically, the fund's 33 holdings consist of companies that conduct business in the food and staples retailing, beverage, food product, tobacco, household product, and personal product industries in the United States.

Taking a look at the chart below, you can see that the fund was trading along a clear upward trendline until the breakdown earlier this year. The strong bounce over the past several weeks has resulted in some traders talking about a continuation of the uptrend, but it is important to note the price action near the combined resistance of the 200-day moving average and dotted trendline. The failed attempt to move above the psychological $60 mark and clear resistance shown by the 200-day moving average and horizontal trendline suggest that the bears are still in control of the momentum.

Furthermore, followers of technical analysis will likely use this nearby resistance along with the bearish crossover between the 50-day and 200-day moving averages (shown by the blue circle) to signal the next leg of a longer-term downtrend. Bullish traders may want to remain on the sidelines until the price is able to notch several consecutive closes above resistance or other key technical indicators turn positive again.

Chart showing the share price performance of the Consumer Staples Select Sector SPDR Fund (XLP)
StockCharts.com

The Procter & Gamble Company (PG)

As the top holding of the XLP ETF, The Procter & Gamble Company (PG) will likely be of specific interest to active traders. As you can see from the chart below, the break below the 200-day moving average, which was fought with a fair amount of buying pressure, has triggered a bearish crossover between the long-term moving averages. This signal puts the long-term momentum in the favor of the bears, and many will likely use the nearby resistance levels as guides when placing buy and stop orders.

Chart showing the share price performance of The Procter & Gamble Company (PG)
StockCharts.com 

The Coca-Cola Company (KO)

The Coca-Cola Company (KO) is another top holding of the XLP ETF, and globally, it is one of the best-known companies within the consumer staples sector. With much attention being given to the portfolio of Warren Buffett in recent days, many active traders will be watching Berkshire Hathaway's key holdings such as Coca-Cola.

As you can see below, March's sell-off has triggered a bearish crossover between the 50-day and 200-day moving averages, which will likely be used by followers of technical analysis to mark the start of a long-term downtrend. In addition, the recent move toward the 50-day moving average will be of specific interest over the coming days because it also suggests that the bears are still in control and that the momentum from the bounce may be coming to an end.

Chart showing the share price performance of The Coca-Cola Company (KO)
StockCharts.com

The Bottom Line

March's surge in demand for certain consumer staples products had many active traders wondering whether the sector would move counter to the broader market. Based on the charts discussed above, it is clear that the bulls have their work set out for them in getting the uptrend back on track. Nearby resistance levels and long-term technical sell signals suggest that the bears are in control and that the next leg of a long-term downtrend is getting underway.

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.