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'Tis the Season to Own Utility Stocks

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Simple analysis clearly shows the selling momentum is slowing and where price should go if it can break out above the red dotted resistance line. These ETFs are poised to benefit.

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Over the past week, I have been keeping my eye on several key sectors and stocks for potentially large end of year rallies to lock in more gains before 2013.

My recent calls have been Research In Motion (NASDAQ:RIMM) (up 54%), Apple (NASDAQ:AAPL) (up 5%), and Facebook (NASDAQ:FB) (up 8%) so it's been a great month thus far. That being said, there are three other plays that look amazing and one of them is the utilities sector.

Looking back 30 years, utilities have clearly had a tendency to rally going into year end. What makes this setup so exciting is that the Obama tax for 2013 has caused many investors to lock in capital gains along with dividend gains so the utility sector has recently been beaten.

I always like to cheer for the underdogs because they can make large moves quickly and this season the underdogs are utility stocks.

30 Year Seasonality – Utilities Stocks



Utility Sector ETFs

In the graph below, I show the main utility ETFs for trading. Simple analysis clearly shows the selling momentum is slowing and where price should go if it can break out above the red dotted resistance line. Exchange-traded funds Utilities SPDR (NYSEARCA:XLU), First Trust Utilities AlphaDEX Fund (NYSEARCA:FXU), iShares Dow Jones US Utilities (NYSEARCA:IDU), and WisdomTree International Utilities Fund (NYSEARCA:DBU) are the funds I found to be setting up.



Utilities Sector Trading Conclusion

While I feel utilities are about start moving higher, it is important to mention that the broad market is setting up for a one to three day pullback. If the stock market does pull back this week, then we should see utilities pull back also. What I am looking for is a minor pullback in XLU with price holding up above $34 while the stock market pulls back.

Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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