(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of NFLX and SBUX.)
The Select Sector SPDR ETF (XLY) is up over 13.7 percent in 2017, trailing the S&P 500 Index's 15.5 percent spike. But with the sector breaking out, it seems the group may be on its way to beating the S&P 500.
The chart below shows the technical resistance level for the sector at $92.25, and how the ETF is now breaking above that level. This breakout is in part being fueled by the rising stock prices of Starbucks and Nike.
Meanwhile, Netflix shares are beginning to show signs that it, too, is getting ready to surge.
Shares of Netflix have tested and held support at the $190 trading region, and the stock has been able to bump higher. Additionally, the stock has been able to re-enter its longer-term trading channel, which dates back to the summer of 2016.
Ultimately, Netflix shares should continue to trade higher within the range and eclipse $200. (See also: Disney Streaming Service to Undercut Netflix Price.)
Starbucks shares broke out after the company reported its 4Q financial results at the start of November. The stock cleared a significant hurdle at $56, and has been able to rise above its 200-day moving average.
Starbucks stock reached nearly $58, helping to close part of the gap created in late-July. The stock began trending higher in late-August and appears to have the ability to continue to rise toward $60. (See also: Starbucks: We Open a New Store in China Every Day.)
Nike shares have been in a significant downtrend since late 2015, and the stock is now making a second attempt at breaking out. The first attempt failed in the early summer of 2017, when shares gapped higher, only to retrace to a lower level. The stock has done an excellent job of holding support on many occasions at the $50.50 level.
Nike stock has now risen to near $56, signaling a breakout. If there is one major hurdle left for Nike, it is around $57.50. If the stock can rise above $57.50, it likely has a clear path toward $66 and perhaps toward all-time highs.
Consumer discretionary stocks appear to be getting in sync with one another, and that is pushing the individual stocks and the sector higher.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.