The utility sector has remained strong of late, as it appears that traders and investors are looking for interest rate alternatives to bonds in the upcoming rising rate environment.
For the most part, we’ve seen a lot of large-cap technology companies become favorites of the yield-foraging crowd, but now, it appears that investors’ fears of a market top have them looking for a safer harbor: utilities.
Today’s three big stock charts look at utility companies that have been bucking the interest rate trend to move higher. Is the party over for these companies or is it just getting started? Let’s take a look at Duke Energy Corp (NYSE:DUK), Consolidated Edison, Inc. (NYSE:ED) and WEC Energy Group Inc (NYSE:WEC).
Duke Energy Corp (DUK)
After consolidating at the stock’s 50-day moving average, Duke Energy shares have rallied more than 6% above $80 and they are showing signs that the technicals are favoring higher prices.
The 50-day for DUK just moved into a bullish pattern by beginning to ascend. And now, the same trendline is headed towards a “Golden Cross” as it prepares to move above Duke Energy stock’s 200-day moving average.
The $82.50-mark has been chart resistance in the past as DUK stock halted at this price in June and August 2016. The same price also served as the “neckline” for a head-and-shoulders pattern that ultimately saw shares of Duke Energy decline below $75.
Over the short-term, a break above $82.50 will get the technical buyers even more involved with the buying, targeting another 10% rally above $90.
Consolidated Edison, Inc. (ED)
Another utility company preparing to make a move higher, based on the technicals, is Consolidated Edison. ED stock’s 50-day moving average also transitioned into a bullish pattern over the last two weeks as Con Ed shares rallied out of a long-term consolidation that had held shares in a range for two months.
Breaking above $75, ED shares are slightly overbought; however, this is offset by building momentum and the pending Golden Cross that is likely to occur within the next two weeks. This pattern will attract another round of technical buyers.
Con Edison is in position for a short squeeze rally on a move above that $75 as short sellers have been adding to bearish positions on the stock. The current short interest ratio stands at 6.8, above the level that we consider a trigger for potential short covering rallies.
WEC Energy Group Inc (WEC)
Not all boats are rising in the Utility sector as shares of WEC Energy Group are lagging the market.
Shares of WEC are stuck in a technical rut as they trade between the 50- and 200-day moving averages. The stock has been in a consolidation that has been defined by these two trendlines since December.
Momentum is starting to improve as the shorter 20-day moving average is now making a move to trend higher, but the overhead resistance from the 200-day may be too overbearing to allow a breakout for WEC.
We have seen an increase in trading volume as WEC stock was trying to break through the 200-day, indicating that technical traders are starting to bet on this momentum carrying the stock higher. For now, traders should watch the $60-level as a break above that level will likely lead to another shot above the 200-day with a potential target of $65 over the intermediate-term outlook.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.