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3 Utility Stocks That Are Running Out of Juice

The love for utility stocks has cooled of late. For much of the year, income-starved investors piled into the Utilities SPDR (ETF) (NYSEARCA:XLU) for its hefty dividend. Though XLU’s current 3.3% dividend may not qualify as gargantuan based on historical standards, it stands tall in today’s low rate world.

3 Utility Stocks That Are Running Out of Juice (DUK AEP EXC)

As recently as July, the utility sector stood atop the leaderboard with year-to-date gains of 22.5%. And that’s before taking into account any dividends paid along the way.

The tides, however, are turning for utility stock lovers — at least in the short run. The specter of higher rates has returned to haunt yield hunters. And with that, the once glorious uptrend of XLU is faltering.

The latest setback came Friday when Janet Yellen’s Jackson Hole speech elevated expectations for a rate hike in the near future. Bonds, REITS, and yes, utility stocks all took a swan dive amid heavy volume.

With the sector now surveyed, I can report that the following three utility stocks are some of the worst performers of late.

Utility Stocks to Sell: Exelon Corporation (EXC)

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Source: OptionsAnalytix

Today’s trio boasts a number of recurring themes that, on a side note, perfectly illustrate the positive correlation carried by stocks in the same sector. I will attempt to vary the analysis, but the reality is the charts of all three utility stocks are moving in virtual lockstep.

First up is Exelon Corporation (NYSE:EXC). With a dividend yield of 3.73%, EXC sits in the middle of today’s pack from an income-generation perspective.

Since carving out its 52-week high earlier this month, EXC stock has fallen just shy of 10%. The selling accelerated Friday and returned shares of Exelon back to near-term support. Watch for a break of the $33.50 support zone in the days ahead.

If you’re a utility stock bear, consider using the support break as your trigger for a short stock or long put trade.

Utility Stocks to Sell: Duke Energy (DUK)

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Source: OptionsAnalytix

Duke Energy Corp (NYSE:DUK) boasts the highest dividend of today’s selections. It’s mouth-watering 4.26% yield beckons to income hunters everywhere.

Like its predecessor, DUK has fallen prey to profit-taking. Duke Energy shares are down 6% over the past month. The reversal of fortune has taken the stock back below its 20- and 50-day moving averages. Worse yet, both averages are now declining, confirming the stock has entered a short-term and intermediate-term downtrend.

While the bears have yet to wrest control of the long-term trend, damage has been inflicted. If you think utility stocks will continue falling out of favor, consider shorting DUK stock with a stop loss above $83.

Utility Stocks to Sell: American Electric (AEP)

Click to Enlarge
Source: OptionsAnalytix

American Electric Power Company Inc (NYSE:AEP) rounds out our list of weakening utility stocks. Its 3.45% yield places it dead last among today’s selections as far as its income-producing properties.

The price chart looks virtually identical to its peers: Its uptrend peaked in July and has since slid back below the 20-day and 50-day moving averages. Provided AEP stock remains below $67.50, the bears have the upper hand.

If you think their reign persists, consider fading today’s pop with a short trade. The 200-day moving average looming below is a logical first target for the trade. And the aforementioned $67.50 level can be used as your stop loss. A break above that and the appeal for a bearish trade begins to fade.

At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.

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