×

This sector looks primed to break out: Technician

The consumer discretionary sector ETF (XLY) has risen twice as much as the S&P 500 ETF (SPY) over the past three months. But technical analyst Todd Gordon of TradingAnalysis.com says the best is yet to come.

Gordon says that the ETF is currently in the throes of consolidation—but that such action has recent precedent.

"We saw a period of two-month consolidation back in December and January, which led to a nice breakout on the top side," Gordon said Monday on CNBC's "Power Lunch." "Here we are at it again, with the broader averages generally consolidating."


So is another, similar upside breakout around the corner?

"We could have a few more weeks before we're at the two-month mark" for the consolidation cycle, "which could coincide with a little bit more clarity in earnings," Gordon said.

But eventually, he believes it's going higher. And once it breaks out of the recent range, the technician will become even more bullish.

"I am long XLY with a call spread, and I am looking to add to it once we break through the topside at about $78," Gordon said.