After reaching new highs early in 2015, the utilities sector — as represented by the Utilities SPDR (XLU) — has fallen more than 6% year-to-date.
However, in the days since the Federal Open Market Committee declined to say whether it would elect to raise rates at its September meeting, XLU has registered several days of positive price action after bouncing off of its 100-day moving average near the $42 level.
Several individual stocks within the sector are also reflecting the rebound, and Profit Scanner has identified multiple bullish opportunities to take advantage of this reversal.
Here’s a look at three utility stocks to play in the current environment:
Utility Stocks With Bullish Charts: PPL Corp (PPL)
Click to Enlarge PPL Dividend Yield: 4.7%
After gapping lower at the start of June, shares of PPL Corp (PPL) began to form a head-and-shoulders bottom pattern.
As you can see in the chart to the right, the first upside-down shoulder formed when the stock bounced off of the $30 level and headed upward to test resistance at $31.
PPL then began to move back down toward its 200-day moving average at about $29 before reversing to test $31 again, which formed the “head” of the pattern.
The second upside-down shoulder formed as PPL once-again wrestled with resistance. This time, PPL was able to clear $31, and has since headed back up to the $32 level, which was identified as an intermediate-term bullish event.
According to Profit Scanner, the classic head-and-shoulders bottom pattern marks a reversal of a downward trend. PPL will now have to clear resistance at $32 before moving higher, but could fill the gap up to $33 and higher on strong and convincing volume.
PPL stock also sports a dividend yield of 4.7% and is set to go ex-dividend on Sept. 8.
Utility Stocks With Bullish Charts: Northwest Natural Gas (NWN)
Click to Enlarge NWN Dividend Yield: 4.2%
Shares of Northwest Natural Gas (NWN), which also carry a hefty dividend yield of 4.2%, have traded almost in lockstep with the broader utilities sector since the beginning of the year.
The chart shows the decline from about $52 in January to the current $43.50 level. However, after finding support at $42 in early June, the stock has formed a diamond-bottom pattern.
According to Profit Scanner, a diamond-bottom pattern occurs when a stock’s price creates higher highs and lower lows as it broadens out and then gradually narrows as the next set of highs and lows start to trend upward again.
As it cracked the $43 level on its last leg, NWN completed the diamond bottom, and Profit Scanner is now identifying a target price range of $45.70 to $46.10. NWN will have to break through resistance at $45 to reach those levels, but if it does, it would represent upside value of 5.5% to 6.5% from current levels.
Utility Stocks With Bullish Charts: Southern Co. (SO)
Click to Enlarge SO Dividend Yield: 4.8%
Shares of Southern Co. (SO) gapped higher after reporting quarterly earnings that beat expectations. SO stock has risen nearly 5% since the announcement, which triggered several bullish technical events, according to Profit Scanner.
The ascending blue line in the weekly chart to the right represents SO’s longer-term, 200-week moving average. After falling below this level — in sync with the decline in the rest of the utilities sector — SO has broken above the moving average to clear its $45 resistance level.
The horizontal light-blue line on the chart above shows that $45 has acted as either support or resistance since mid-2014. Now that it has been cleared, Profit Scanner has identified an upside target range of $45.90-$46.40. The upper end of the target range sits right where SO peaked in April of 2014. If that next layer of resistance is cleared, a test to $47 and $48 could come quickly, which would represent a potential gain of up to 6%.
Like the other utility names Profit Scanner has identified, SO pays a hefty annual dividend of $2.17 a share, which is good for a yield of 4.8%.
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.