Power Stocks Regain Their Momentum

Power stocks lost their juice a couple of months ago but have surged back since then. The energy sector ended last week just 7.9% overvalued, with public utilities only 6.1% overvalued, a far cry from their Oct. 25 overvalued levels of 17.2% and 11.5%, respectively. It's high time to update my profiles for energy stocks and public utilities.

The Energy Select SPDRs(XLE Quote) declined 17.8% from the high of $54.65 on Sept. 22 to the low of $44.94 into Oct. 20, and has been consolidating in this range since then. The XLE is 9.6% undervalued, with fair value at $56.64. The weekly chart profile is positive, with the five-week modified moving average at $49.97. I show a monthly value level at $49.45 with a monthly pivot at $51.91. If XLE moves above $51.91, the upside for a trade is to my quarterly risky level at $54.68.

Meanwhile, the Dow Utility Average stands at 403.03, having declined 13.6% from its all-time high of 438.74 set on Oct. 4 to a low of 378.95 on Oct. 20. The Utility Average has been above its 200-day simple moving average since mid-April 2003, which was last tested on May 12, 2004. Therefore, a trend below the 200-day SMA at 384.86 would be a sign that the utilities' bubble has broken. The rebound for utilities would continue, given a close this week above the five-week MMA at 400.30, because that would shift the weekly chart profile to positive, indicating a rebound to my quarterly resistance at 430.69 and monthly resistance at 433.17. ...