This hot sector is about to get even hotter: Technician

Trading Nation: The consumer trade

Even after a weak retail sales number, consumer discretionary stocks continued their impressive rally, hitting an all-time high Tuesday. And according to one technical analyst, the real discretionary rally could just be getting started.

"The technical action's been very positive over the past few months," said Ari Wald of Oppenheimer. "We remain bullish and recommend an overweight portfolio position."

Retail sales fell 0.3 percent in June, missing economists' expectations for a 0.2 percent rise. Despite the disappointing data, the consumer discretionary sector still is the second-best performing sector in the S&P.

And Wald sees more upside ahead.

Read MoreRetail sales pullback sparks concerns about recovery

According to Wald's chart, the SPDR Consumer Discretionary Sector ETF (XLY) has held up as markets have withdrawn amid global economic issues. "It's barely budged through that volatility. Traders did not want to sell," he said.

Now that concerns have started to ease, the XLY is breaking out to new levels, he said.

"The tell for us has actually been the relative trend. Relative to the S&P 500, that actually broke out last month," Wald said. "[It] led through the volatility, now leading through the breakout. These are signs of a healthy trend."

Even though retail sales have slipped, Erin Gibbs, equity chief investment officer at S&P Capital IQ, said consumers aren't necessarily spending less. Instead, they're shifting their expenditures from retail to entertainment with companies like Amazon, Netflix, Walt Disney, and other leisure and media companies.

"People are spending money as long as it has to do with entertaining themselves," she said.

Still, within the consumer discretionary sector specifically, Gibbs views Home Depot and Kohl's as particularly attractive stocks to watch.

She also said the sector's quick recovery from the market pullback is to be expected, thanks to its strong earnings growth outlook.

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