Investors the land over are preparing for Brexit aftershocks in the weeks to come. Money is rotating from the most suspect of sectors into those with a history of weathering storms.
While any and all stocks with European exposure are being jettisoned, lower-volatility, income-producing stocks are being embraced.
Chief among the market leaders during Friday’s bloodbath was the utilities sector. At one point the Utilities Select Sector SPDR Fund (XLU) was up 1%.
Impressive, to say the least.
The dominance of utilities stocks can be attributed to a number of factors. First, the flight to safety has driven bond prices into the stratosphere, killing bond yields in the process. The 10-year yield, which started the year north of 2%, has now fallen sub-1.5%. And while U.S. Treasuries’ income-producing qualities are superior to most other countries, 1.5% leaves much to be desired for income-seeking investors.
Enter utility stocks with their juicy 3.3% yield.
Second, the utility sector has long since been a member of the defensive sector camp. With their lower volatility and more predictable cash flow streams, the attraction of utility stocks grows when market turmoil strikes.
Here are three utility stocks offering protection from the Brexit brouhaha.
Utility Stocks for Brexit Protection: Duke Energy Corp (DUK)
First up we have Duke Energy Corp (DUK). The Charlotte-based electric power holding company held up like a champ last week. Should the yield chase persist in the months ahead, look for DUK stock to revisit its all-time highs near $90. Little resistance remains between here and there.
There’s nothing not to like about Duke’s chart here. All trends point higher with rising moving averages to accompany them. Volume patterns are firmly in favor of buyers, with accumulation days multiplying in recent weeks.
The high base forming in DUK over the past week is signaling a clean entry point over the $83 level. A break above that price threshold is as good a signal as any to climb aboard this utility stock.
Utility Stocks for Brexit Protection: Exelon Corporation (EXC)
Next up we have Exelon Corporation (EXC).
While the utility stock remains a far cry from its all-time highs, strides have been made in recent months. Since vaulting higher amid the January stock swoon, EXC has spent the past few months in consolidation mode.
Its meanderings have taken on the form of a symmetrical triangle. If you’re looking for some price appreciation to go along with your yield, consider waiting until EXC stock can pop above $35.50 before pulling the trigger.
Such a breakout may well kick off a renewed advance.
Utility Stocks for Brexit Protection: American Electric Power Company Inc (AEP)
American Electric Power Company Inc (AEP) rounds out the list, and it may just be the best of the bunch.
AEP notched a new all-time high Friday, rallying on heavy volume. And while the stock closed a touch off its highs, it left chart watchers with a beauty of a setup to behold.
The action over the past three months has taken on the form of a cup-and-handle type pattern. Look for a breakout over $67.50 in the days ahead.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.