Run for safety. That was the sentiment on Wall Street Tuesday after President Donald Trump halted negotiations on a second stimulus package until after the November election.

The decision came as a shock to financial markets given the president tweeted just days earlier that the country must work together to deliver further economic relief. Although Republicans and Democrats remain at loggerheads about the size and details of additional stimulus measures, Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi were reportedly making progress in discussions and had been scheduled to continue talks Tuesday.

Key Takeaways

  • President Donald Trump halted negotiations on a second stimulus package until after the November election.
  • Edison International (EIX) shares pushed above the top trendline of a falling wedge pattern and 50-day simple moving average (SMA).
  • CMS Energy Corporation (CMS) broke out above an ascending triangle and the closely aligned 50- and 200-day SMAs.

While stocks reversed course to close lower following the announcement, utilities names bucked the trend to finish higher. Investors view the sector as a safe haven during times of uncertainty due to the group's predictable earnings streams and high-paying dividend yields. Below, we take a closer look at two leading utilities stocks and analyze their charts to identify possible trading opportunities.

Edison International (EIX)

Californian utility giant Edison International supplies electricity to around 5 million customers in a 50,000-square-mile area of Southern California, excluding Los Angeles. Investors will be looking for the power provider to improve on its second quarter earnings, where it reported a profit of $1 per share – representing a bottom-line decline of 36.7% from a year earlier. Analysts expect the company to disclose third quarter adjusted earnings of $1.43 per share when it releases financial results later this month. As of Oct. 7, 2020, Edison International stock has a market capitalization of $20.37 billion, yields 4.85%, and is trading 26% lower year to date.

Buyers pushed the share price above the top trendline of a falling wedge pattern and 50-day SMA Tuesday in a move that may fuel further upside momentum in subsequent trading sessions. Those who enter here should anticipate a move up to the $62 level, where price may run into overhead resistance from a multi-year horizontal line. Protect capital with a stop-loss order placed somewhere below yesterday's breakout point at $52.

Chart depicting the share price of Edison International (EIX)
TradingView.com

Resistance, or a resistance level, is the point at which the the price of an asset meets pressure on its way up from the emergence of a growing number of sellers who wish to sell at that price.

CMS Energy Corporation (CMS)

CMS Energy operates as an energy company though four segments: electric utility, gas utility, enterprises, and enerbank. The $18 billion utility firm posted second quarter adjusted earnings of 49 cents per share, with the figure surpassing analysts' expectations by 3 cents per share and improving 48.5% from the year-ago quarter. CMS also reaffirmed its 2020 full-year earnings per share (EPS) guidance range of $2.64 to $2.68. Trading at $62.89 and offering a 2.59% dividend yield, the stock has gained 2% on the year, outperforming the sector average over the same period by around 3% as of Oct. 7, 2020.

CMS shares broke out above an ascending triangle and the closely aligned 50- and 200-day SMAs Tuesday. Moreover, the price has ample room to move higher before consolidating, given that the relative strength index (RSI) sits below overbought conditions. Traders who buy the breakout should look for a retest of the all-time high at $69.12 but exit if the stock fails to hold above the 200-day SMA around $61.

Chart depicting the share price of CMS Energy Corporation (CMS)
TradingView.com

An ascending triangle is a chart pattern used in technical analysis. It is created by price moves that allow for a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.