The consumer discretionary sector has seen amazing gains in recent years as the economy emerged from the depths of the financial crisis. Judging from the fundamental environment, as well as through a technical lens, the sector’s run in this cyclical bull market doesn’t appear to be over quite yet. 

#-ad_banner-#And one stock within the sector that looks to have plenty more upside is California-based shoe company Deckers Outdoor (NYSE: DECK).

Just as the broader market’s steep uptrend over the past five years has been met with investor disbelief, many market watchers have long called for the end to the rise in consumer discretionary stocks. They rationalized their bearish stance with hand-picked economic statistics, but price is the ultimate arbiter, and they couldn’t have been more wrong.

The Consumer Discretionary Select Sector SPDR ETF (NYSE: XLY) has risen more than 300% since the double bottom in late 2008 and early 2009. The trend is up, and until that changes, there’s no sense in going against it and no money to be made fighting it.

With the strong uptrend in the consumer discretionary sector intact, I combed through the charts of a hundred consumer discretionary stocks, looking for technical patterns that spoke to a continuation in the bullish trend. And it was DECK that had the most compelling chart pattern.

Looking at the weekly chart stretching back to late 2007, we see that the steep incline into the October 2011 top was followed by an equally steep correction into the late 2012 bottom. Importantly, however, the 2012 low qualified as a higher low versus the 2009 lows. 

The rise off the 2012 lows has been constructive thus far, and for most of 2014, DECK has consolidated that move. This consolidation has taken the shape of a bullish wedge, which as the name indicates, tends to resolve to the upside.
On the daily chart, we get a close-up of the wedge pattern. Since February, each time the stock dipped, it made a higher low and then quickly turned up.

We have seen a number of brokers either initiate coverage on DECK or up their price targets, but without much effect on the stock’s price. On Friday, Wells Fargo initiated coverage with an “outperform” rating and a price target range of $92 to $98, based on sales momentum for several of the company’s brands and good diversification in its product line.

DECK fell slightly on the day, but I expected that the technical picture indicated it should soon begin to synchronize with the positive broker calls. And indeed it did, as DECK gained 3.6% on Monday, breaking out of its consolidation pattern.
I expect the rally to continue, particularly considering the positive direction of the consumer discretionary sector as a whole. 

Action to Take –>
— Buy DECK at the market price
— Set stop-loss at $80
— Set initial price target at $92 for a potential 11% gain in three to six weeks

This article was originally published at ProfitableTrading.com:
The No. 1 Consumer Discretionary Stock to Buy, According to the Charts