As the stock market spews volatility in the face of a Chinese rout, continued Greek uncertainty and economic reports that may change the Federal Reserve’s plans, it is getting difficult to sleep at night. 

However, as per their unofficial mandate, consumer staples stocks are acting like a welcome island of calm in the storm. This sector has been outperforming the broader market all summer and has even made an arguable technical breakout.

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As commodities in general remain weak, it was interesting to find cocoa of all things ending a rebound with a downside trend break. While I cannot offer statistically sound proof that companies using cocoa as an input, namely chocolate makers, perform better as the commodity falls it certainly could not hurt.

What I see now in Hershey (NYSE: HSY) is an upside trend break that occurred three days after the breakdown in cocoa. And I see a chance for traders to pick up a double-digit profit over the next few weeks.

Hershey is indeed a member of the consumer staples group, where companies’ fortunes are not closely tied to the ups and downs of the economy. People will continue to buy products such as soap, cigarettes, makeup and food, even chocolate. Some may argue that the more nervous people get about their portfolios the more chocolate they might consume, but I digress. 

HSY bounced off long-term support last month only days after announcing job cuts and a lower sales outlook on June 19. The price decline that day was sizeable and volume was exceptionally high to suggest some sort of selling climax and capitulation by the bulls. Even though prices drifted a bit lower, selling pressure was all but gone. Theoretically, everyone who wanted to sell had finally done so. 

The vacuum of supply after a six-month downdraft left the stock exhausted. Cautious bulls nibbled and were not opposed. Then after rising to meet the January trendline, HSY punched through.

Conservative traders might wait for an inverted head-and-shoulders pattern to complete, but I believe the trend break following the rejection of bad news is enough to justify being early.

The first resistance exists at $96.50, near the May high and November breakout zone. The next resistance is in the $102.75 area, the top of the March-to-April trading range and the bottom of the December dip.

What is even more interesting is that both of these levels are approximate Fibonacci retracements of the 2015 decline. They are not exact, but they are close enough to demand respect.

Somewhere in the middle is the 200-day moving average, which I find useful as a trend gauge and not as a specific support or resistance level. Right now that average is flat and has been for the past year. As such, I would expect any rebound to overshoot it, and that is why I favor the higher resistance level as my price target here.

Recommended Trade Setup:

— Buy HSY at the market price 
— Set stop-loss at $89
— Set initial price target at $102.75 for a potential 12% gain in eight weeks 

Note: While consumer staples stocks may be a good place to wait out a potential storm, trading prodigy Jared Levy warns that many stocks may be in danger of falling 20%. Earlier this month, he went public with an urgent warning, and you only have a few days left to watch it. Click here to access it before it comes down July 30 at midnight.

This article was originally published on ProfitableTrading.com: Beaten-Down Consumer Favorite Breaks Out — Time to Buy?​