By Doug Busch
It's common knowledge that Amazon and Tesla are tech behemoths -- they tout Magnificent Seven membership and mega market valuations.
But they also have big influence over consumer discretionary stocks, and technical analysis shows their recent performance could bode well for the lagging sector.
The consumer discretionary group is flat year to date, compared with the S&P 500's 8% gain. But it has perked up nicely over the past month, rising more than 11% for the second-best performance among the 11 major S&P 500 sectors.
The State Street Consumer Discretionary Select Sector exchange-traded fund, commonly known by its ticker symbol, XLY, is very top-heavy: The top two holdings, Amazon and Tesla, make up nearly half of the fund.
Depending on their price direction, those two stocks can pull their peers higher or lower, and therefore, monitoring their behavior is important. Their path will likely have a major influence on the broader consumer discretionary group, so it's worth taking a closer look at the technical setups developing for both Amazon and Tesla.
So far in 2026, a clear divergence has emerged between the two consumer discretionary heavyweights. Amazon this week climbed to a fresh all-time high and has surged 29% over the last three months, while Tesla is unchanged over the same time frame.
However, Tesla has shown signs of renewed momentum, rallying 14% during the week ending April 14. This week, it is displaying excellent relative strength, gaining more than 5% as the XLY added 1%. If Amazon and Tesla continue strengthening together, that could help drive additional inflows into the sector ETF, providing broader support for the remaining discretionary names as capital flows across the group.
Looking at the stronger chart first, Amazon is on track for its first six-week winning streak since a nine-week run that ended in late 2023. On its ratio chart versus Tesla, the stock has clearly outperformed since December.
I examined Amazon three months ago when it rebounded from the very round $200 level. Since then, it has formed two bullish morning star patterns in February and March. The April 8 gap higher completed a bullish island reversal, and this week the stock recorded a bullish golden cross.
The stock is now trading well above the double-bottom breakout pivot at $249.04, which was cleared on April 16. While Amazon shares might be somewhat extended in the near term and a bearish MACD crossover is possible, the preferred strategy is to look for entries closer to $265, targeting a move toward $325 by mid-2026. That would represent 23% upside from current levels. Remain bullish above $245.
Amazon was trading around $272 Friday.
Looking at Tesla's daily chart, the stock has begun to materially outperform its electric-vehicle rival Rivian after breaking above a bullish ascending triangle on the ratio chart. Three weeks ago, Tesla registered a bullish MACD crossover and has rallied roughly $75 from that point.
The stock recently retested its prior breakout from a symmetrical triangle from last September, coinciding with the lower boundary of the current bullish inverse head-and-shoulders pattern. Round-number theory has also played an important role around the $400 level. Notably, a doji near $500 on Dec. 22 marked the beginning of the current drawdown, while the $400 area served as support during November, and again through this February and March.
A doji on April 7 appears to have marked Tesla's near-term low at $337. Since then, Tesla has reclaimed both its 200-day simple moving average and its 21-day exponential moving average, reinforcing the improving technical backdrop.
Enter at current levels and target a move toward $500 during the third quarter, for 22% upside from current prices. The bullish thesis remains valid as long as Tesla stays above $389. The stock was trading around $423 Friday.
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 08, 2026 13:20 ET (17:20 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
