There are instances where I'll see clusters of stocks within a sector setting up for breakouts or even breaking out while the overall sector drags. That's the case with utilities at the moment.
There are several names in the group like AES Corporation (AES), FirstEnergy (FE) and NextEra Energy (NEE) that look like ones to clearly avoid. On the flip side, Edison (EIX), WEC Energy Group (WEC) and Great Plains Energy (GXP) look like a trio of buyable names as a basket here.
These charts all have very similar setups on the daily and the weekly charts, but I'd prefer to buy them as a group rather than just picking one rather than another. A quick look at the charts might shed some light as to why I would prefer to pursue this thesis.
WEC looks to be the chart that has already broken out higher in terms of price. The Relative Strength Index (RSI) has pushed back into overbought territory, which was good for the price action in August as long as the RSI stays above 70. The same can be said for the Commodity Channel Index (CCI) and Force Index. Basically, the bulls favor an overheating of momentum, volume and trend, but jump ship quickly when the situation ends.
GXP is on the verge of a breakout here. The stock just needs to pick up a few dimes here to trigger a breakout based on price. While the stock doesn't have an RSI above 70 yet, the CCI and Force Index are both very strong here and the RSI won't need much more of a push to get over that 70 hump.
Last up is Edison, which possesses a similar price breakout with WEC. The difference here is EIX has a second resistance trendline going back to June. The RSI has attempted to break above 70 several times since August without any success. It hasn't head the stock back, but it would be more comforting to see it happen. Furthermore, the drop on the CCI to the 100 area puts this one at the bottom of the list for these three. Still, it is strong enough to consider. In all three cases, a slight pullback to recent resistance followed by a push higher would be the most attractive entry point.
The weekly charts show almost an exact repeat of the daily charts. WEC has already broken above resistance while GXP sits right on resistance. The only difference here is the breakout on the EIX weekly chart is just as strong as WEC in terms of price. That is the biggest reason it's included in the trio here.
The RSI on all three charts are identical triplets. Basically, we know the momentum is the same across the board. Interestingly, GXP has the strongest and most consistent trading in regards to volume while WEC is the weakest. Where WEC loses the volume battle, it wins the trend battle with the strongest MACD. EIX is happy making its home in the middle every time when it comes to volume, momentum and trend.
These varying positions within different indicators is what leads me to conclude the group would be stronger together rather than one standing alone. The upsides aren't huge, but these three look like they could plod ahead 5-7% over the next 3-6 months. Using the weekly charts, a tight stop at the most recent breakout point could be used or you could use the prior support levels understanding those are about 10% lower. While that seems like quite a drop, for a long-term investor looking to pick up a group of names that will average out to a 3.25% yield, these are some very attractive names with a clear stopping point on a conservative group.
