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XLU: What to Expect from US Utility Stocks

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Dec. 5 2017, Updated 9:11 a.m. ET

Moving averages

US utility stocks continue to look strong considering their key moving average levels. On December 1, 2017, the Utilities Select Sector SPDR ETF (XLU) was trading 3% and 6% above its 50-day and 200-day moving average levels, respectively. XLU’s 50-day moving average level of ~$54.90 will likely act as a support for XLU going forward. Currently, it’s trading at $56.41.

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Relative strength index

XLU’s RSI (relative strength index) is at 62.

RSI values below 30 are said to be trading in the “oversold” zone, while values beyond 70 are said to be in the “overbought” zone. Technical analysts consider RSI values at extremes to be a signal of a reversal in the stock’s direction.

Large-cap utility stocks like NextEra Energy (NEE), Dominion Energy (D), Duke Energy (DUK), and Southern Company (SO) all are trading at a noticeable premium to their respective key moving averages. Their RSI levels also look steady. It should be noted that these top stocks form 33% of the Utilities Select Sector SPDR ETF (XLU).

Short interest

According to a recent report, the short interest in the Utilities Select Sector SPDR ETF (XLU) fell marginally on November 15, 2017. The total shorted shares in XLU were 42 million on October 31, while they fell to 41.82 million on November 15, 2017.

The fall in the short interest might imply that fewer investors expect the ETF to fall soon from the current levels.

Short interest signifies the shares that are sold short and not covered yet. It commonly tracks investors’ anxiety.

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