By Doug Busch
Consumer staples stocks have quietly outperformed over the last month, with the State Street Consumer Staples Select Sector SPDR ETF up 4%, the third best of 11 major S&P 500 sectors. It is a sign investors may be rotating toward more defensive areas of the market after the powerful rally in growth and technology shares.
Historically, improving relative strength in staples can suggest rising caution beneath the surface as investors favor stable earnings, consistent cash flow, and dividend-paying companies during periods of economic uncertainty or market consolidation.
Alternatively, we might be seeing a broadening rally where a barbell approach favoring strong, growth-oriented areas of the market can complement value groups. Whatever the case, selective stocks in any sector that exhibit strength must be respected. With that in mind, let's look at a couple of my former picks from January, Coca-Cola and Target, and see how they have behaved since.
Coca-Cola, one of the world's largest beverage companies, is enjoying a strong 2026, up 16%, and pays a dividend yield of 2.6%. The stock is just 1% below its 52 week high and has demonstrated excellent consistency this year, not recording back-to-back weekly losses through May.
Looking at the daily chart, the first thing that stands out is the stock's relative strength versus its main rival, Pepsi, as the ratio chart recently broke above a bullish ascending triangle. That breakout suggests improving leadership within the beverage space.
The stock has also broken out from several constructive technical formations over the past year. The first came with a move above a bullish inverse head-and-shoulders pivot near $72 in November, followed by a breakout above a double-bottom trigger at $71.42 on Jan. 14. Most recently, shares cleared a cup-with-handle pivot at $80.42 on May 14.
A continued advance could carry the stock toward the $95 level during the third quarter, a 17% gain from current prices. Remain bullish above $77.
Coca-Cola was trading around $81 Monday.
Target, one of the largest retail chains in the U.S., has posted a solid year to date return of 26%, although it declined 6% over the last month. It pays a dividend yield of 3.7% and is on its first three week losing streak in six months.
Looking at the monthly chart, the stock has shown improving strength with a current five-month winning streak, its first such run since the beginning of 2021. In February, the stock also recorded just its third bullish MACD crossover of the last decade, signaling improving long-term momentum.
The stock has also quickly distanced itself from its 200-month simple moving average, a constructive development given that a similar touch in 2017 preceded a strong advance. Technically, the chart now appears to be building the right side of a large double-bottom base.
Enter here and add exposure on a move above the 50-month simple moving average near $136. Look for the stock to reach $200 by early 2027, a 62% gain from current prices. The bullish outlook remains intact above $117.
Target was trading around $121 Monday.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 18, 2026 14:09 ET (18:09 GMT)
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