uploads/2017/06/XLU-dma-1.jpg

Will US Utilities Keep Muscling Up?

By

Updated

Chart indicators

The Utilities Select Sector SPDR ETF (XLU) has managed to gain nearly 12% so far in 2017. By comparison, the SPDR S&P 500 (SPX-INDEX) (SPY) has gained 9% during the same period. Now let’s examine where US utilities (XLU) could go in the near future.

XLU dma

Article continues below advertisement

Moving averages

If the Fed raises interest rates next week, it could certainly bring temporary weakness to utilities. However, utility stocks look strong right now, and their strength is underlined by fair premiums to their simple moving average levels. On June 7, 2017, XLU was trading 4% and 9% above its 50-day and 200-day moving averages, respectively.

Remember, when a stock’s price crosses above or falls below its moving average, it’s considered a bullish or bearish sign, respectively.

Utilities’ RSIs

RSI (relative strength index) is a momentum indicator made up of values between 0 and 100. Movements of below 30 are considered to be in the “oversold” zone. Movements of above 70 are considered to be in the “overbought” zone and could hint at an imminent reversal in the stock.

The smart rally in the past several trading sessions has shoved US utilities (IDU) into the overbought zone. XLU’s RSI currently stands at 78, and so theoretically, we could see some selling in XLU.

Advertisement

More From Market Realist