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XLU: US Utilities Trade in the Oversold Zone

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Relative strength index

After a sustained fall in the last few trading sessions, the Utilities Select Sector SPDR (XLU) seems to be trading deep in the oversold zone. On July 5, 2017, XLU’s RSI (relative strength index) was 16. XLU’s deep RSI levels might encourage new buyers.

It’s important to note that the RSI is a momentum indicator made up of values between zero and 100. Movements below 30 suggest that a stock is oversold, while movements above 70 suggest that a stock is overbought. Extreme RSI level signals a possible reversal in the stock movement.

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Moving averages

Currently, XLU is trading at a 2% discount and a 3% premium to its 50-day and 200-day simple moving average levels. XLU breaking below its 50-day moving average can be considered as a bearish sign in the short term. XLU might face resistance around $52.75 going forward. We’ll likely see weakness in XLU until it crosses above this level.

Read How High Will NextEra Energy Stock Go? to learn about what’s happening with the biggest utility stock by market capitalization.

Total returns

XLU’s one-year total returns were 1%, while financial stocks (XLF) returned 40% during this period. Technology stocks (XLK) gave total returns of 30% in the past year. The smart surge in financial and technology stocks and the fall in utility stocks led to extreme total returns.

The energy sector had total returns of -1%, while the SPDR S&P 500 (SPX-INDEX) (SPY) returned 19% in the past year.

While calculating total returns, we considered capital gain and dividends paid in any particular period.

You can compare the top three utility stocks (IDU) to learn which one offers a better investment proposition. Read The Best Utility Stock out There: NEE, DUK, or SO? to learn more.

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