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Technical indicator predicts gains for staples stocks

VIDEO2:2602:26
Trading Nation: Consumer staples hot?

The briefly crossed above its 50-day moving average Wednesday — a potentially positive technical sign that could indicate gains for the consumer staples sector in particular.

Using data going back to 2009, a Kensho analysis found that in the month after the S&P 500 crossed above its 50-day moving average, the index has risen 78 percent of the time on a one-month basis. And the most dependable sector has been consumer staples, which are up 83 percent of the time.

For Todd Gordon of TradingAnalysis.com, such action makes sense.

"If you look at the interplay between consumer staples and the S&P 500, they do have store value as the S&P moves lower," Gordon said Wednesday on CNBC's "Power Lunch."

However, he said the sector could be a dangerous bet if the market takes another tumble.

"If the market is going to capture that 50-day just above us, then we can talk about it, but that's a big presumption. I don't think consumer staples are safe if we roll back over," Gordon said.

The 50-day moving average is a standardized measure that simply averages the most recent 50 closing prices.

But given this technical signal, Erin Gibbs of S&P Capital IQ said the health-care sector is actually the better pick, compared to other expected outperformers like consumer staples and utilities.

While health care also tends to do well when the S&P crosses above its 50-day moving average, Gibbs said, it also has higher earnings growth and more attractive valuations than other sectors.

"Given the period we are at right now, expecting earnings and interest rates to rise, I'd really just stick with health care," Gibbs said Wednesday.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.


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