Be a Utility Player With XLU

 | May 26, 2017 | 9:46 AM EDT
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The Utilities Select Sector SPDR Fund  (XLU) moved up to a new high yesterday. Impressive.

In this daily bar chart of XLU, below, we can see a large reversal pattern from September through February. Prices started to rally with more urgency in late February. During March, April and most of May the XLU traded sideways in a narrow range before moving up to a new high this week. Prices traded through the 50-day moving average line earlier this month but the slope of the average line stayed positive and now the XLU is back above this indicator of trend. The 200-day moving average line is now turning up again.

The daily On-Balance-Volume (OBV) line moved higher in November and again earlier this month to signal more aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator turned up from the zero line this month for a fresh go long signal.

In this weekly chart of the XLU, below, we can see the price movement covering the past three years. Prices are above the 40-week moving average line and it looks like the slope of the line is turning up again. The weekly OBV line has been in a smooth and steady rise the past three years and this is a strong vote for the rally to continue. The weekly MACD oscillator is in a bullish configuration above the zero line.

In this Point and Figure chart of XLU, below, we can see the major uptrend and the recent breakout. This chart only projects a price target in the $54-$55 area, but we are likely to rally higher to the $60-$61 area based on the weekly bar chart.

Bottom line: Stay long utilities or buy more as the XLU looks like it is headed for the $60-$61 area in the months ahead. Risk a close below $51 for now.

Columnist Conversations

we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...
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