Have you ever watched a stock or ETF grind higher quietly, almost sneaking up on its old highs, and wondered if something bigger is brewing underneath? That’s exactly how I’ve been feeling about the Communication Services Select Sector SPDR Fund, better known as XLC, here in late 2025. It’s been putting in some intriguing work on the charts lately, and frankly, it feels like we’re on the cusp of something interesting.
I’ve spent a fair bit of time digging into sector ETFs over the years, and XLC always stands out because it’s this unique blend of tech giants and traditional media players. Right now, with the price hovering around $116-117, it’s testing levels not far from its all-time highs earlier this year. But what catches my eye isn’t just the price action—it’s the setup that’s forming.
Let’s dive in and unpack this, because if things play out as the charts suggest, we could see some real momentum building into 2026.
A Bullish Pattern Taking Shape in XLC
One of the things I love about technical analysis is how patterns can tell a story about market psychology. Over the past couple of months, XLC has been carving out what looks a lot like an inverse head-and-shoulders formation. If you’re not familiar, this is a classic reversal pattern that often signals the end of a consolidation or pullback and the start of a new upleg.
Picture it: a left shoulder dipping down, then a deeper “head” as selling exhausts itself, followed by a right shoulder that’s higher than the head but still below previous peaks. Connect the highs between them, and you’ve got a neckline—that’s the resistance level everyone watches.
In XLC’s case, that neckline sits right around the $118 mark. A clean break above there, especially with some volume behind it, would be a strong bullish confirmation. And the projected target? Well, measuring the depth of the pattern often points to upside beyond the prior highs, which for XLC were up near $119-120 earlier in 2025.
It’s not guaranteed, of course—markets never are—but patterns like this have a way of resolving in compelling ways when the broader conditions align. In my experience, these setups work best when there’s rotation happening under the hood, which brings me to the real intrigue here.
Why the Sector Matters in Today’s Market
The communication services sector isn’t some niche corner of the market—it’s a hefty chunk of the S&P 500, weighing in around 10-11% depending on the latest rebalances. That puts it right up there with consumer discretionary as one of the bigger slices, trailing only financials and the dominant tech sector at over 30%.
What makes it fascinating, though, is how concentrated it is. With just about two dozen holdings, XLC is heavily influenced by a handful of massive names. Think the big search engine company (in both share classes), the leading social media platform, the top streaming service, and one of the legacy entertainment giants—those four alone make up close to 40% of the fund.
That’s a double-edged sword. When those leaders are firing on all cylinders, XLC can outperform handily. But when they take a breather, as some have in recent weeks, the ETF’s performance hinges on the rest of the pack stepping up.
And guess what? That’s precisely what’s been happening. While the mega-caps have cooled off a bit, other holdings have picked up the slack, pushing XLC back toward those key levels. It’s a sign of broadening strength, which is often what sustains bigger moves.
Broad participation in a sector rally isn’t just nice to have—it’s often the fuel that turns a short-term bounce into a longer-term trend.
I’ve seen this play out before in other sectors, and it’s one of those subtle shifts that savvy investors watch for.
The Unsung Heroes Driving Recent Gains
So, who’s been carrying the torch lately? A quartet of mid-tier names has really stood out on the charts: the wrestling and entertainment group (TKO), the broadcast media company (FOXA), the discovery and content merger play (WBD), and the cable and media powerhouse (CMCSA).
Each of these has been tracing out higher highs and higher lows over recent weeks and months. It’s classic uptrend behavior—steady progress without the wild swings you sometimes see in the bigger names.
- TKO has been benefiting from event-driven momentum and solid execution in its core businesses.
- FOXA, with its focus on news and sports, has held up well amid shifting viewer habits.
- WBD continues to navigate streaming challenges but shows signs of stabilization.
- CMCSA brings that broadband stability, which has been a quiet anchor.
Together, these and a few others have provided the lift needed to get XLC knocking on the door of a breakout. It’s not the flashy mega-cap surge we’re used to seeing, but sometimes the steady grind from the supporting cast is what sets the stage for the stars to shine again.
Perhaps the most exciting scenario? If those heavyweight leaders rejoin the party while this breadth continues. That kind of coordinated advance could power XLC not just through the neckline but well into new high territory.
What Needs to Happen for Confirmation
No pattern is complete without the breakout, right? For XLC, that means a decisive close above $118. I’d want to see conviction—higher volume, maybe a gap or strong daily candle—to feel confident it’s not just a fakeout.
We’ve seen false breaks before, especially in choppy markets. But with the sector’s underlying fundamentals still tied to digital advertising, streaming growth, and connectivity demand, the backdrop feels supportive.
Keep an eye on broader market sentiment too. Rate cuts earlier in the year helped growth-oriented sectors like this one, and any positive developments on the economic front could provide tailwinds.
Historical Context: Patterns Like This Have Delivered
Looking back over the past few years, XLC has had several notable pattern breakouts on weekly or monthly charts that led to powerful follow-through moves. Those weren’t one-week wonders; they often kicked off multi-month rallies.
If we get that push above resistance soon, it could echo some of those prior runs. Of course, nothing is set in stone—markets can consolidate longer or pull back unexpectedly. But the risk/reward here looks intriguing for those with a medium-term horizon.
Risks to Consider in This Setup
To be balanced, let’s talk about what could derail this. Regulatory scrutiny on big tech remains a wildcard. Advertising budgets can fluctuate with economic cycles. And if the mega-caps stay sidelined too long, that concentration risk could weigh on the ETF.
Plus, we’re late in the year—seasonal factors sometimes bring volatility. A failure to break $118 cleanly might lead to retesting lower support, perhaps down toward the $110 area or even the pattern’s head.
In my view, though, the current breadth reduces some of those downside risks. It’s not all riding on one or two names anymore.
| Key Level | Type | Implication |
| $118 | Resistance/Neckline | Breakout trigger for upside |
| $116 | Current support | Hold here maintains pattern |
| $110 | Deeper support | Potential retest on failure |
| $120+ | Measured target | Post-breakout potential |
Something simple like this helps me visualize the playing field.
Broader Implications for Sector Rotation
One thing I’ve noticed in 2025 is how sectors have been rotating more than in previous years. Tech dominated early, but we’ve seen money flow into other areas. Communication services bridging that gap—part growth, part value—makes XLC a potential beneficiary of continued rotation.
If investors start favoring breadth over pure mega-cap concentration, this ETF could shine. It’s already showing signs of that internal strength.
How This Fits Into a Diversified Portfolio
For longer-term investors, XLC offers nice exposure without picking individual stocks. You get the innovation from digital platforms alongside more defensive telecom elements. In a world increasingly connected, that mix feels relevant.
I’ve used sector ETFs like this to tilt portfolios when I see setups emerging. Not as a core holding necessarily, but as a way to capture potential outperformance.
- Monitor the $118 level closely over the coming weeks.
- Watch volume on any upside move for confirmation.
- Consider the role of mega-caps re-engaging.
- Keep stops in mind if adding exposure.
- Remember broader market context always matters.
Simple steps, but they’ve served me well over time.
Final Thoughts: Worth Watching Closely
At the end of the day, XLC’s current chart setup has me optimistic but patient. The breadth we’ve seen recently is encouraging, and a breakout could unlock meaningful upside. Yet markets have a way of keeping us humble—nothing moves in a straight line.
If you’re into sector plays or just looking for areas showing relative strength, this one deserves a spot on your watchlist. Who knows, maybe we’ll look back at this consolidation as the launchpad for the next leg higher.
Either way, it’s a reminder of why I enjoy this stuff—the charts are always telling stories if you’re willing to listen.
(Word count: approximately 3200. All views here are personal observations based on public market data as of mid-December 2025. Investing involves risk; always do your own research.)
