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TheStreet Open House

'Tis the Season to Own Utility Stocks

Stock quotes in this article: XLU, FXU, IDU, DBU

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 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 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.

What I am looking for is a minor pullback in XLU with price holding up above $34 while the stock market pulls back.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.

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