During times of turmoil, the utilities sector usually holds up well, and this year has been no different. Year to date, the utilities sector as a whole is up 8.6%, while the S&P 500 index is down 4.42% as of the Friday close at 1,215.65. The SPDR Utilities Sector Select Index (NYSE:XLU) is up 10% to $34.64, from $31.49 year to date. Looking within the utilities sector, traders can find multiple stocks that are performing well, with many up more than 10% so far this year. There is even an handful that are up more than 20%; four of these stocks remain in strong uptrends, and while some are volatile, the stocks are likely to continue to outperform, even if the market move sideways or retreats further. Sector rotation strategies indicate that investors move into utility stocks in the early stages of recession, or when there is a threat of a recession. This is why utilities have been so strong recently and may continue to be, as long as there is fear about a decline or a flat-lining of the economy.
EQT Corporation (NYSE:EQT) is up 31.4% to $59.01 from $44.91 at the beginning of the year and remains in an uptrend. The 200-day moving average has provided the support and pullback may provide another opportunity for investors to get in. ETQ just crossed below the 50-day moving average so it may continue to slide down in the short-term, but if the trend can hold, buying the stock between $55 and $52.50 looks like a good entry point. A rise above $65.05 will break through short-term resistance and set in motion a likely retest of the high at $73.10.
Another stock that has been performing very well this year is Constellation Energy (NYSE:CEG). The stock is up 28.53% to $39.65 from $30.85 year to date. It is also trading well above the 200-day moving average and remains in a strong uptrend. CEG has pulled back very little and remains close to the 52-week high at $40.97. If the stock breaks above the 52-week high, there could be more room to run on the upside. The 50-day moving average has been providing some support, but if the price drops below it ($38.67) the trend line at $37 could be tested.
NiSource Inc (NYSE:NI) is also having a strong year to date, up 23.39% to $22 from $17.83. NI also remains very close to the 52-week high, and it has consolidated above the 50-day moving average. The consolidation pattern resembles a small triangle or pennant formation, and a rise above $22.40 would indicate an upside breakout of the pattern. If the breakout occurs, the 52-week at $23 will likely be tested and if momentum continues, look for the price to move towards $24 to $25.
CenterPoint Energy (NYSE:CNP) is up 22.53% to $19.36 from $15.80 year to date, and it remains in an uptrend. The stock recently moved below its 50-day average, but demand continues to be strong for the stock based on the continually rising on balance volume. Between $19.50 and $18.50 appears to be a good entry point if the uptrend continues. A drop below the 200-day moving average at $18.33 would signal that the stock is weakening. (For more, see Moving Averages: Introduction)
The Bottom Line
In times of fear, the utilities sector usually stacks up fairly well as investors move money to this more conservative and stable sector. Year to date, the sector as a whole has been outperforming the S&P 500, and is likely to continue to do so as long as fear about the economy is present. The stocks presented are all in strong uptrends and provide opportunity to potentially take part in the next advance as the uptrends continue. If a stock declines and breaks its respective 200-day moving average, it is a sign investors are moving out of the stock. Based on current performance, though, utilities remain the strongest sector and provide one of the best opportunities for relative risk protection and performance. (For more, see Technical Analysis Introduction.)
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At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.