'Tis the Season to Own Utility Stocks
NEW YORK ( TheStreet) -- 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 (RIMM) (up 54%), AAPL (AAPL) (up 5%), Facebook (FB) (up 8%), so it's been a great month thus far. That being said there are other plays that look amazing and one of them is the utilities sector.
Looking back 30 years, clearly utilities have 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 its utility stocks.
30-Year Seasonality: Utilities StocksUtility 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 XLU (XLU), FXU (FXU), IDU (IDU) and DBU (DBU) are the funds I found to be setting up. Utilities Sector Trading Conclusion: While I feel utilities are about to 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.
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