Several U.S. sectors have taken a dive in recent weeks…

The Nasdaq entered a correction earlier this month. A number of other stocks have taken a beating. But one specific sector’s pullback has gone too far.

You see, this sector fell sharply to end February. It hit oversold levels for the first time since March 2020.

Now, it’s starting to bounce back. So while this is typically a boring sector, history says if you buy now – given the setup in place – you could earn double-digit profits.

Let me explain…

When a stock moves too far, too fast in a given direction, a bounce back is likely. That’s why we call the situation “oversold.”

These signals work as lines in the sand to see when a stock has gotten ahead of itself. And they highlight potential buying opportunities. We can use the relative strength index (“RSI”) to see this at work…

When a stock falls below and rises back above an RSI of 30 – triggering oversold levels – a snapback in the other direction is likely.

That’s exactly what we are seeing in the boring consumer staples sector today.

This sector holds companies like Procter & Gamble, Walmart, and Coca-Cola. They’re great businesses, no doubt. But it’s not the most exciting area of the market.

That doesn’t matter though. The Consumer Staples Select Sector SPDR Fund (XLP) recently hit oversold territory. Take a look…

The new signal triggered on March 1. It was an extremely rare move – setups like this have happened just 1% of the time since 1999.

Plus, it marks a buying opportunity for investors. Similar setups have led to significant outperformance over the next year. Check it out…

XLP has returned roughly 4% in a typical year since its inception in 1999. That’s not a sexy return in the grand scheme of things. But buying after an instance like today’s turns out much better…

Similar oversold cases have led to more than 3% gains in three months, 5% gains in six months, and roughly a 10% gain over the next year.

That’s much better than a simple buy-and-hold strategy. And it means this boring sector has a chance of delivering double-digit gains.

XLP has already reversed course since the start of the month. But there’s still plenty of upside potential left over the next year.

You might think of these as boring companies… But buying them at the right time can mean solid profits. That time is now. History shows XLP is a good opportunity today.

Good investing,

— Chris Igou

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Source: Daily Wealth