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A Look at XLU’s Moving Average and Relative Strength

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Mar. 26 2018, Published 1:29 p.m. ET

Moving averages

The Utilities Select Sector SPDR ETF (XLU) fell below its long-term support level last week, which indicates that weakness may continue in the sector. XLU is currently trading 1% below its 50-day moving average and 7% below its 200-day moving average. The fair discount to both key levels highlights the weakness in XLU. Its 50-day moving average level, around $47.7, is likely to act as a resistance for the ETF in the short term.

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Relative strength index

On March 23, XLU’s RSI (relative strength index) was at 37. According to technical analysts, RSI values below 30 suggest that the stock is trading in the “oversold” zone, while values above 70 mean that the stock is trading in the “overbought” zone. Extreme RSI values could suggest an imminent reversal in the stock’s direction.

Among the utility giants, NextEra Energy (NEE) stock looks strong, given its moving averages. It’s currently trading 4% above its 50-day moving average and 6% above 200-day moving average, indicating strength.

In comparison, Dominion Energy (D), the third-largest utility by market capitalization, has been tremendously weak lately. It’s presently trading 9% lower than its 50-day moving average and 14% below its 200-day moving average. Its RSI, at 16, indicates that the stock is trading in the deep oversold zone.

Duke Energy (DUK) and Southern Company (SO) are also trading below their respective support levels.

These four top utility stocks form more than 35% of XLU.

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