Heightened volatility in recent weeks has investors flocking to safety. Specifically, sectors that are traditionally known as natural hedges such as utilities, financials, and materials have been major beneficiaries thanks to the predictable business models and high barriers to entry. In this article, we'll take a look at several charts from across the utilities sector and try to determine how followers of technical analysis will look to position themselves over the weeks ahead.

Utilities Select Sector SPDR Fund (XLU)

With the rise in popularity of sector-specific exchange-traded funds (ETFs), one fund that could be worth a closer look is the Utilities Select Sector SPDR Fund (XLU). Fundamentally, the fund comprises 28 holdings with a weighted average market capitalization of approximately $45.5 billion. The ETF has total net assets of $10.8 billion and carries a gross expense ratio of 0.13%, which helps make it the most popular fund for trading the performance of the utilities sector.

As you can see below, the price has been trading within a defined channel pattern since the start of 2019, and there doesn't seem to be any reason to believe that it will reverse any time soon. Long-term traders will look to buy on a dip toward the support of the lower trendline or the 50-day moving average. Stop-loss orders will most likely be set below the 200-day moving average in case of a sudden sell-off.

Chart showing the share price performance of the Utilities Select Sector SPDR Fund (XLU)
StockCharts.com

NextEra Energy, Inc. (NEE)

With a weighting of 12.25%, NextEra Energy, Inc. (NEE) represents the top holding of the XLU ETF. As you can see from the chart, the price is trading within an ascending channel pattern similar to the one shown on the chart of XLU. Active traders will want to take note of how the 50-day moving average has propped up the price over the year on each attempted pullback. Trend traders will expect this behavior to continue in the future and will likely use the dotted trendlines and major moving averages in determining the placement of their orders. Based on the pattern, traders would expect the trend to continue for the remainder of 2019 and perhaps beyond.

Chart showing the share price performance of NextEra Energy, Inc. (NEE)
StockCharts.com 

Duke Energy Corporation (DUK)

Another top holding of the XLU ETF that could capture the attention of active traders over the coming weeks is Duke Energy Corporation (DUK). With a market capitalization of $68.4 billion, Duke Energy is one of the most well-known companies in the utilities sector and is often used as a leading indicator for how the rest of the sector is set to perform. Taking a look at the chart, you'll notice that the price has held above the support of its 200-day moving average and has recently surpassed the resistance of the dotted trendline. The momentum so far in September suggests that the bulls are in control of the direction and that this could be the theme for the remainder of 2019.

Chart showing the share price performance of Duke Energy Corporation (DUK)
StockCharts.com

The Bottom Line

Retail and professional investors appear to be shifting capital to stable sectors such as utilities due to recent events and heightened geopolitical uncertainty. Based on the charts discussed above, it is clear that the momentum is under the control of the bulls and that this sector could be poised for a strong finish to 2019.

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.