Stocks in the Dow Jones iShares U.S. Utilities ETF (IDU) have been hit hard as of late, along with many other interest rate sensitive sectors. Now let’s break down the bounce we have seen from the dismal jobs report that came out on Friday. The headline number clearly missed, with the majority of jobs added falling in the low wage and low productivity categories (i.e. retail). The biggest surprise was the huge revisions lower for both June and July which sent the 10-Year T-Note (TNX) southbound, giving immediate relief to the parabolic rise we have seen throughout the year in interest rates. This all but signaled that those who believe tapering is coming anytime soon are possibly very misguided.
So now we are left with all these bullish interest-rate-sensitive sectors filled with stocks that not only pay high dividends but could very well turn into the new momentum leaders because of their egregiously oversold condition.
The best three stocks technically set to blast off in the Utilities Index not only pay a great dividend but will appreciate rapidly in price. They were a buy last week, and are still a buy this week.
Duke Energy Corp. (DUK): On September 6, Duke developed a hammer pattern on the intraday chart. A hammer pattern appears during a downtrend, displaying a long lower shadow with a small real body at the top of the range. The price may be developing a bottom and is due for a reversal to the upside.
DUK has a 4.8% dividend yield with an $82 price target.
Spectra Energy Corp. (SE) developed an inverted hammer last week, a pattern that shows the recent decline is approaching its bottom, as the balance between buyers and sellers evens out. The inverted hammer appears during a downtrend with a long upper shadow reflecting an attempt a higher prices, and a small real body at the lower end of the range reflecting an evening out of the balance between buyers and sellers as the bears have lost some control. In short, the price may have reached a bottom and is ready to turn higher.
SE has a 3.7% dividend yield with a price target of $42.
Sempra Energy (SRE) is another good pick, as the Williams %R indicator is showing oversold conditions.
SRE may see a new uptrend now that the price has recovered from oversold (it dropped below -80 on the indicator, then rose above). Meanwhile there is clear evidence that the trend has reversed (continued through the -50 level). Williams %R is built on the premise that as prices increase, “close” prices tend to be closer to the upper end of the recent price range, and vice versa. The oscillator looks at the most recent “close” price as a percentage of the high-to-low price range over a specified period of time (14 bars) so when %R is high, it’s likely we’re seeing upward pressure, and vice versa.
SRE has a 3% dividend yield with a price target of $102.
Bottom line, one thing is becoming increasingly certain – stocks are headed higher and now it looks like just about every other asset class is going to join the party, from bonds to gold and anything not nailed down.
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.