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Utilities Fell from ‘Overbought’ to ‘Oversold’ Last Week

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Moving averages

The recent weakness in the Utilities Select Sector SPDR ETF (XLU) has pushed it below its 50-day simple moving average level, which might concern investors. XLU is still trading 3% above its 200-day moving average level. The level at $52.5 is expected to act as crucial support for XLU in the short term. XLU closed at $53.8 last week.

XLU dma

So far in 2018, utilities (VPU) at large have risen more than 2%, while broader markets have fallen 10%.

Recently, there was a notable increase in the volume traded across broader markets. On December 21, more than 35.6 million shares exchanged hands in XLU compared to the average volume of 22.0 million.

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Relative strength index

XLU is trading in the “oversold” zone with its RSI (relative strength index) at 23. RSI levels at extremes suggest an impending reversal in the stock’s direction. The S&P 500’s RSI was 11 last week.

Shares of top utilities NextEra Energy (NEE) and Southern Company (SO) fell into the “oversold” zone last week. NextEra Energy stock has fallen below its 50-day moving average level, while Southern Company has fallen below its 50-day and 200-day moving average levels, which indicates weakness.

The short interest in XLU has decreased 11% as of November 30. The total shorted shares in XLU were ~52 million on November 15, while the total shorted shares decreased to 46.2 million as of November 30.

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