In 2018, U.S. pet owners spent more than $72 billion dollars on their animals, and that figure is expected to surpass $75 billion in 2019. To say that the pet business is big business is a gross understatement.
As the majority of the dollars get directed toward food, supplies, medicine, veterinarian care, and other services, investors are prudent to look for opportunities to allocate capital in these niche segments as they arise. In the paragraphs below, we'll take a closer look at a few charts from across the pet sector and try to determine how traders will best position themselves over the weeks or months ahead.
ProShares Pet Care ETF (PAWZ)
Active traders who aren't familiar with specific holdings within the pet care industry often turn to exchange-traded products such as the ProShares Pet Care ETF (PAWZ). Taking a look at the chart, you can see that the price is trading within the confines of an extremely well-formed ascending channel pattern. Based on this chart, we'd expect followers of technical analysis to buy near the lower trendline and sell on a move toward the upper trendline. Range-bound traders will also use the nearby support of the 50-day moving average, which has propped up the price on several occasions over the past several months, as confirmation that the uptrend is expected to continue. The doji-style candlestick from Tuesday also suggests that current levels are providing traders with an ideal buying opportunity.
PetIQ, Inc. (PETQ)
Those looking for specific pet-related companies to add to their portfolios often turn to the holdings of niche ETFs such as PAWZ. Taking a look at the chart of PetIQ, Inc. (PETQ) below, you can see that the price recently moved above the long-term resistance of the 200-day moving average (red line). It is interesting note how this level is now expected to reverse its role and become support on any attempted pullback. The bullish momentum has also triggered a bullish crossover between the 50-day and 200-day moving averages, known as the golden cross. This common long-term buy signal, which is highlighted by the blue circle, is often used to mark the beginning of a major uptrend, and recent price action suggests that the price could be poised to test the 2018 high of $43.93.
One of the dominant companies in the world of animal health is Zoetis Inc. (ZTS), which was spun off from Pfizer in early 2013. As you can see from the chart below, the stock was trading under a dominant level of resistance for much of the past 12 months, but the price breakout earlier this year suggests that the next leg of the long-term uptrend is underway. Active traders will likely look to buy near the support of the 50-day moving average and set stop-loss orders below the 200-day moving average in case of a sudden shift in fundamentals. Based on the chart pattern, there are no levels of resistance standing in the way of a significant run higher.
The Bottom Line
People across the United States spend a significant portion of their disposable income on their pets. The strong underlying fundamentals combined with bullish chart patterns make this a niche market segment to watch for a long time to come.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.