Utilities SPDR (ETF) (XLU) — XLU hit a new all-time high Monday as investors sought safety and yield following the surprising outcome of the Brexit vote.
I last covered XLU as the Trade of the Day on Jan. 11, when it was trading around $43, noting it was a good buy for short-term traders and long-term investors alike. Those who have held since that recommendation are up more than 20% on the position, including dividends.
XLU, which tracks the price and yield performance of the Utilities Select Sector Index, has been the best-performing S&P sector ETF of the year hands down. S&P Capital IQ rates the fund “Overweight,” while Morningstar give it “Four Stars” (out of five).
The top 10 holdings in XLU are NextEra Energy Inc (NEE), Duke Energy Corp (DUK), Southern Co (SO), Dominion Resources, Inc. (D), American Electric Power Company Inc (AEP), Exelon Corporation (EXC), PG&E Corporation (PCG), PPL Corp (PPL), Sempra Energy (SRE) and Edison International (EIX).
Turning to the chart, we can see that in January, XLU broke from a bull channel at about $45 and established a bullish support line. That line, which is supported by two buy signals from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), remains intact.
XLU broke from a right triangle consolidation in early June on a gap up and ran to a new high at $50.91 by mid-month. It continued its advance on Monday, again supported by a CBR buy signal, and closed at another new high at over $51.
The recent breakout, which is undoubtedly due to a rush to safety and dividends, has driven XLU to a slight premium. Therefore, try to buy it at $50 for a quick trade to $55 and a potential return of 10%. Long-term investors seeking income and safety should buy this quality ETF at the market price.