Although it is one day early for a Turnaround Tuesday, we are seeing a nice oversold bounce today. Didn't anyone get the memo that it's Monday? After a $0.90 pullback or nine handles on the S&P 500, the SPDR S&P 500 (SPY) traded back to the highs. That's fairly significant.
In my view, the bulls don't want this to run too far, too fast today, but a close above Friday's highs would be huge. The whole stream I read on Twitter is suddenly filled with momentum traders again. I don't think we are quite down on this bounce, but I also don't see the market going straight up this week. There are plenty of earnings reports on tap to drive the markets, but I have a tough time seeing SPY clear $185 this week. I think that would be the cap to any bounce this week.
Jim Cramer mentioned the unabashed and unabated buying in utilities this morning. How the purchases there continued even as the yields regressed toward nothingness. Unfortunately, it has been the strongest sector and strength often begets strength.
I posted a chart last week that discussed how far off 52-week highs some of the big indices currently were trading and the utilities ETF sat less than 1% off its 5-week moving average at the time, which was significantly better than anything else in the group. As I sit and watch more terrible weather roll across the U.S., I can't help but think that its run isn't quite done. This cold weather is likely to push usage up.
There are a few names in the sector with yield, and the one with my interest right now is Teco Energy (TE). Admittedly, I read this one as Taco Energy at first and given my constant consumption of such food, I probably became a bit biased in liking the stock. Still, there is more here than just the name.
I view TE as a utility with a coal call option built in. Tampa Electric Company along with newly acquired New Mexico Gas drive more than 80% of the earnings here. The company is looking at $0.95 to $1.05 this year while paying an $0.88 dividend. That means the vast majority of this 5%+ yield is covered by a fairly stable utility business.
The remainder of the company is driven by Teco's coal facilities in Kentucky and Virginia. Clearly, the sentiment, especially the political sentiment, is negative on coal. Still, if there is any recovery in coal pricing and usage, Teco's coal exposure offers its shares a very large upside.
Technically, this is one of the strongest, new breakouts in the sector. The daily chart is seeing a strong price breakout today on very good volume. RSI is only pushing above 70 with price, so the stock is certainly not into overbought territory. CCI above 200 is indicated either a very quick, large push higher or a new trend developing.
Expanding out to the weekly chart shows me an open path to $18.25. There is simply no resistance until we hit that number based on the currently chart. CCI is breaking bout to new highs in front of price while RSI should run to at least 70 from here.
A close under $17 and the channel is back in play, so I would likely buy more as long as $16 held. Unless something changes fundamentally, I would buy the stock at this level and at $16. I would consider taking some small profits at $18.25, but I believe $19.50 is the 12-18 month target -- along with a 5% yield.