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Consumer Staples Rise as Investors Rotate to Stability

David Becker
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Consumer staples have been experiencing an uptick in capital flows as investors rotate out of momentum stocks and into secure financial securities. Consumer staples are essential products such as food, beverages, tobacco and household items. Consumer staples are goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation. Consumer staples stocks are considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing.

Both Dean Foods (NYSE:DF) and Tyson foods (NYSE:TSN) saw increasing momentum in their stock prices on Monday with both stocks experiencing a MACD bullish crossover. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The bullish crossover pinpoints a time when momentum is increasing at a pace, which is likely to push the price of the stock higher. The MACD index itself moved from negative territory to positive territory, which confirms the buy signal on each stock price.

Both stocks had dipped since hitting a high in April, but are now approaching their 50-day moving averages, which should be a point of strong resistance and if broken, could lead to a test of the 2014 highs.

Staples in general are sought after when growth stocks are under pressure. The question for investors is whether these stock make sense as a purchase given the large declines seen in the Russell 2000 which experience a 20% decline from its highs in February. With interest rates likely to remain low for the next two years, investors will have to determine if the rally in stocks is over and staples are the place to hide.

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