The Bottom Is In For Utilities

Published 01/24/2018, 09:49 AM
Updated 07/09/2023, 06:31 AM

The Utility Sector has never been a place for traders. Staid and regulated, it is more of a place for investors looking for a steady income stream. Dividends galore. Quiet moves. Sometimes it is the quiet ones that are the ones to watch though. As my kids point out, those power line supports look a lot like Transformers ready for battle. And now it seems they may be ready to move.

The chart below helps tell the story. Utilities, as measured by the Utilities Select Sector SPDR (NYSE:XLU) plodded higher from the 2016 election until a top in November 2016. They rose more than 25% over that time. But since that time they have pulled back hard as money moved elsewhere. Two weeks ago the ETF hit a 61.8% retracement of that run higher and Tuesday it made a nascent move up off of that support.

XLU Daily Chart

Momentum also supports a reversal in the downtrend. The RSI made its first higher high as it moves out of being oversold. The MACD is crossing up. Nothing is guaranteed but this set up presents a good low risk opportunity to ride a reversal in the Utilities Sector higher against the recent low as a stop.

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