The exchange-traded fund Utilities SPDR (ETF) (NYSEARCA:XLU), which includes companies in the utilities industry, aims to provide investment results that mirror the performance and yield of the Utilities Select Sector Index.
With XLU up over 17% year-to-date, investors are wondering if the remaining months of 2016 hold promise for additional gains.
Although the longer-term price trajectory still points north, it’s important to check in from time to time to see if opportunities exist to snag shares in related companies at a discount as XLU drifts back to its supportive trendline.
While shares have slid from their early July peak, additional buying support at current levels could give XLU the upside momentum it needs to turn things around and retest its summer highs.
Today, we’ll look at three industry-leading holdings of XLU to gain some insight as to why investors have been a bit bullish over the past week — a reversal from what had been a rough couple of months prior.
Utility Stocks to Buy: Duke Energy (DUK)
Duke Energy Corp (NYSE:DUK) is an electric-power-providing giant. It operates in the Southeast and Midwestern regions of the United States and delivers services to over 7 million customers.
In the chart above, you’ll notice that DUK has gone through extended periods of swings that seem to be within a $30 price range over the past two years. The 200-day moving average has been a reliable indicator during this period, as price has tested and respected it on several occasions.
Although Profit Scanner powered by Recognia has given us three consecutive bullish event signals, it’s important for investors to see if recent price activity holds above the 200-day moving average in the short term. If it does, a bullish position would offer an excellent risk-to-reward ratio.
Should the price fall through the key moving average, a stop just below will help to reduce any losses while preserving capital. However, if the stock bounces higher from here, DUK will likely not meet any resistance until it bumps into the July 6 peak at $87.31.
With DUK currently trading at $82.40, investors could see gains of up to 6% over the next month or two.
Utility Stocks to Buy: Exelon Corporation (NYSE:EXC)
Exelon Corporation (NYSE:EXC) dabbles in just about every area when it comes to energy, including the generation, sale, transmission and delivery of power in the U.S. and Canada.
Technically speaking, EXC is almost a reflection of what we saw with DUK. In the two-year chart above, we see the 200-day moving average being tested again, which is significant in this case as buyers and sellers have respected the indicator time and time again.
EXC currently trades at $35.14 and, with resistance found at $37.70 above, investors would be looking at gains of up to 7.3% over the next few months. This assumes buyers will step in at the 200-day moving average to help propel shares higher again.
On the other hand, if price weakness materializes and shares fall below support at $33.88, investors may wish to have a stop set marginally lower with enough wiggle room to avoid being taken out of the position prematurely.
Utility Stocks to Buy: Public Service Enterprise Group (PEG)
Public Service Enterprise Group Inc (NYSE:PEG) is a diversified energy company that has been in operation since 1903. The company is New Jersey’s largest provider of gas and electric services, operating power plants located in the Mid-Atlantic and Northeast areas of the United States.
Following a period of consolidation throughout much of 2015, shares of PEG appeared to be breaking hard to the downside late last year before touching down on major support as shown back in October of 2014. After a fast start in 2016, shares have yielded back much of that ground, piercing a seemingly unreliable 200-day moving average in the process.
Profit Scanner was quick to pick up on this weakness, signaling two bearish events on Aug. 26 and Sept. 9 and flagging price failures that focused on the 200-day and 50-week moving averages, respectively.
Although PEG has perked up a bit in the short term, the real question is whether or not shareholders will respect the 200-day moving average. If they do, we could see shares tumble all the way back down to $36. But, if PEG can push past $44, there’s no reason to think it cannot then challenge $46 en route to multiyear highs.
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.