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XLU: What to Expect from Utilities in 2019

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Jan. 7 2019, Updated 2:55 p.m. ET

Moving averages

Recently, the Utilities Select Sector SPDR ETF (XLU) seemed to be lingering around its 200-day simple moving average level. Currently, XLU is trading at $52.8, which is ~3% below its 50-day moving average levels. The level close to $54.4 is expected to act as resistance for XLU in the short term. If XLU doesn’t hold the 200-day moving average level close to $52.6, then it might have more weakness in the near future.

XLU is trading at an RSI (relative strength index) of 42, which implies that it isn’t in the oversold or the overbought zone. RSI levels at extremes suggest an imminent reversal in the stock’s direction.

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Top utilities’ chart indicators

Among the top utilities, Southern Company (SO) stock seems weak based on its moving average levels. The stock is trading at $44.7, which is almost 3% and 2% below its 50-day and 200-day moving average levels, respectively. At the same time, NRG Energy (NRG) is trading marginally above its 50-day moving average and 12% above its 200-day moving average level. The premium to both of the levels indicates strength in the stock. NRG Energy, one of the smallest constituents of the Utilities ETF (XLU), was the top-rallied utility stock in 2018. The stock rose more than 37% last year.

Implied volatility

The volatility levels seem to be easing across broader markets—compared to the surge witnessed in the last few months. Broader utilities (VPU) and the S&P 500’s implied volatility was close to 19% on January 4—lower than their respective 15-day average. Increased volatility represents investors’ anxiety. Increased volatility is usually related to falling stock prices.

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