On January 19, 2018, the Utilities Select Sector SPDR ETF (XLU) was trading 7% lower than its 50-day and 200-day moving average levels. XLU’s deep discount to both of the key moving average levels highlights weakness. Its 200-day moving average level at ~$53.57 is expected to act as resistance for XLU in the short term. Currently, it’s trading at $50.14.
Broader utilities have corrected more than 11% since December 1, 2017—compared to broader markets’ (SPX-INDEX) (SPY) surge of 6% during the same period.
Relative strength index
XLU continues to trade in the “oversold” zone with its RSI (relative strength index) at ~22. It has been trading in the “oversold” zone largely since December 18, 2017, when the Senate passed the tax reform bill.
Technical analysts consider RSI values below 30 to be trading in the “oversold” zone, while values beyond 70 are considered to be in the “overbought” zone. Extreme RSI levels might indicate a reversal in the stock’s direction.
It should be noted that many top utility stocks are trading in the “oversold” zone. Duke Energy (DUK) has its RSI below five, while Southern Company (SO) has it around 19. Dominion Energy’s (D) RSI stands at 22. Together, these three utilities account for 25% of XLU.
Read How Are Utilities’ Moving Averages and Short Interest Trending? to learn more.
Next, we’ll look at utilities’ current valuation.