Utilities Week In Review For March 12-16

by: Hale Stewart

Utilities were the only major sector to post a gain last week.

The sector is building upward momentum on the 30-day and daily charts.

Several charts are looking very attractive.

Unlike the previous week, utilities were this week's only gainers:

The XLU was up 2.51%; all other sectors fell.

However, the XLU is still out-of-favor relative to other sectors:

They are still in the lower left-hand corner of the relative rotation graph, indicating that traders are shunning the sector.

There are several reasons the XLU was up this week. The most important is that it appears the Treasury market sell-off which started the XLU's drop at the end of last year is over (I develop the idea in more detail here). Second, this week's sector movement had a defensive bent; notice healthcare (XLV) was the third best performing ETF. Third, it appears the sector is starting to get some upside technical momentum.

As shown in the chart below, 9 of the 10 major XLU members rose last week:

Public Service Enterprise Group (NYSE:PEG) -- one of New Jerseys' major utilities -- was the big gainer, rallying 4.16% (see my profile here). Next Era (NEE) was also up a little over 4% (see my write-up here). Sempra -- the one California utility that is not experiencing wild-fire issues -- rose over 3%. Edison (ED) and American Electric Power (AEP) each rose over 3% (see my reviews here, and here). Only Dominion was down. I couldn't find any major news on the company, but I think traders are starting to sour on the SCANA (SCA-OLD) deal.

Turning to the technical side, let's start with the Utilities 1-week chart:

This is not the best example of a rally, but given utilities overall underperformance over the last few months, we'll take it. Starting with Tuesday's trade, there's a general upward trend to the chart but we don't see a true trendline start until mid-Wednesday.

There are two trends on the 30-minute chart. The first is overall consolidation, which is occurring between the lower-40s and lower-50s (this trend is occurring across all sectors). Second is the uptrend that started on March 7, which has now lasted eight days and taken the sector to the top-end of its recent trading range. Finally, note that the EMAs have now taken on a bullish orientation -- all are rising and the shorter are higher than the longer.

The daily chart is also getting stronger technically. Notice:

  1. Prices are at the top of recent consolidation
  2. Prices are above the 50-day EMA
  3. The MACD is rising and is starting to cross-over into positive territory.

Let's look at just the EMAs from the daily chart:

The shorter EMAs (in red and blue) are starting to rise. The Bollinger Bands are also starting to move higher. And, as I noted above, the MACD is rising.

There are a few individual charts that should be noted:

NextEra (NEE) is now at a 52-week high after breaking through resistance.

Sempra (SRE) is over the 200-day EMA; all the shorter EMAs are rising, as is the MACD.

Public Service Enterprise Group (PEG) is at the top-end of its recent consolidation range and looks poised to break-out to the topside. Pay particular attention to the large volume bar on Friday's trading.

Please email me if there is a particular utility you'd like me to look at.

This post is not an offer to buy or sell this security. It is also not specific investment advice for a recommendation for any specific person. Please see our disclaimer for additional information.

Disclosure: I am/we are long ED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.