3 Utilities Flashing Extreme Bearish Signals

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Utility stocks are having a rough month so far; since Feb. 2, the Utilities SPDR (ETF) (NYSEARCA:XLU) is down 4.7%, versus a 3.2% gain in the S&P 500.

utility stocks

There may be a seasonal aspect to all of this, as analysts have noted that utilities tend to peak in January, then slide downward through May alongside milder temperatures in much of the U.S. But the sharp price swings XLU has made in just the last few sessions has led one writer at Benzinga to wonder if utilities could possibly be “the new high beta sector.”

That’s a pretty bold statement…but, judging by the charts from the Profit Scanner powered by Recognia, there are several utilities whose technical pictures do suggest that the volatility isn’t over yet for these stocks.

If you own these stocks — as many dividend investors do for their income portfolios — then you could be in for a wild ride ahead. If you’re looking to profit from all of this volatility with option trades, for example, then now might be an excellent time to consider trading these three stocks.

Companhia Energetica Minas Gerais (ADR) (NYSE:CIG)

First up is Companhia Energetica Minas Gerais (ADR) (NYSE:CIG), more commonly known as “CEMIG,” a major Brazilian power company. There have been three bearish signals for CIG in the last week, starting with the bearish Continuation Diamond on Feb. 4.

As you can see in the CIG chart below, the bearish Continuation Diamond starts off with higher highs and lower lows in a broadening pattern — then the range gradually narrows after the highs peak and the lows start trending upward. Then the stock breaks down out of the diamond’s boundary lines. This suggests that the prior downtrend will continue.

20150212 ps cig

CIG closed on Feb. 4 at $4.43, and the Profit Scanner expected a further drop to $3.96 – $4.06. Sure enough, CIG stock plowed through that lower target of $3.96 on Wed., Feb. 11.

But the roller-coaster ride might not be over yet: the Profit Scanner notes that the short-term “Know Sure Thing” oscillator turned bearish on Feb. 10 — a more general signal of bearish momentum that could very well continue.

Oneok, Inc. (NYSE:OKE)

Oneok, Inc. (NYSE:OKE) has a very ugly chart at the moment as well. On Feb. 6, OKE displayed a bearish Hanging Man pattern, characterized by a long lower shadow with a small real body at the top of a recent uptrend range. It implies that OKE may have reached a top, has been susceptible to selling pressure and may reverse lower in the short term.

20150212 ps oke

The next trading day, on Feb. 9, OKE crossed below its 50-day moving average — providing further support to the idea that OKE will continue lower into a new downtrend. (This particular event has a longer footprint than the Hanging Man, as it is an intermediate-term signal.)

And most recently, on Feb. 10, two more short-term indicators turned bearish for OKE: the Fast Stochastic and the Commodity Channel Index.

Exelon Corporation (NYSE:EXC)

The technicals for Exelon Corporation (NYSE:EXC) are looking extremely bearish as well. On Feb. 9, EXC flashed a bearish Megaphone Top signal, implying that EXC stock has been unstable, swinging wildly out of control, but that a more decisive downtrend is beginning.

The Megaphone typically consists of two successively lower lows between three higher highs, and then a reversal lower when the price breaks down below the second trough (the lowest lows):

20150212 ps exc

EXC has broken below all kinds of moving averages in the last week as well: the 21-day moving average (a short-term bearish signal), the 50-day and 21-week moving averages (intermediate-term bearish signals), and even the 200-day and 200-week moving average (long-term bearish signals).

Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/utilities-stocks-cig-exc-oke/.

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