This column was originally published on RealMoney on Aug. 4 at 11:30 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
Do you know which sector matched the outstanding gains posted by chip stocks during Tuesday's rally? Software? Telecom? The Internet, perhaps?
Not even close. Under-the-radar utility stocks were in the other rocket ship leaving the launching pad that day.
Back in the 1990s, utility stocks had the reputation of being slow-moving, dividend-hungry behemoths.
But that's just not true anymore. In fact, these liquid equities have been moving around like tech stocks since the new century began.
The utility indices are all poking at new highs right now.
This is great news for market bulls, because it predicts the next bear market is nowhere in sight.
Why? No major decline has ever begun while utility stocks are in rally mode.
Let's build a watch list of the group's strongest stocks and most promising patterns.
Do your homework before taking positions in this sector, though.
Second-quarter earnings have been hit-or-miss, and investors are punishing underperformers.
rallied to a three-year high at $19.30 in early July.
It's been moving sideways in a symmetrical triangle since then. It appears the stock is still dealing with resistance from a nasty 2002 selloff.Once it can absorb this supply, it should rally out of the triangle and reach well into the mid-$20s.
has been a top sector performer for the last three years. It hit an all-time high at $54 just two weeks ago and has been consolidating its gains since that time. Price jumped up to the July high this week and broke out in Wednesday's session. This move could carry the stock above $60 by the third quarter.
reached $41 a few weeks ago, stalled out and moved sideways in an ascending triangle. The stock broke out of this congestion pattern on Wednesday, but closed poorly. This sets up a reliable buying signal when it trades above $42, the high of that reversal bar. The next rally should reach the upper $40s.
Sierra Pacific Resources
Sierra Pacific Resources
stalled at $13 about six weeks ago, where it's been dealing with strong resistance from a post-millennium topping pattern. It appears to be absorbing this supply well and should move substantially higher soon. Watch the rising channel closely because a push above $13.40 should set the breakout into motion.
hit its bull market high at $39 five months ago and pulled back in a deep correction. It found support at the 200-day moving average and has been grinding its way back to resistance since then. The stock jumped out to a new high earlier this week and should start a strong uptrend once it consolidates in the upper $30s.
broke out to an all-time high over $27 two months ago and stalled out immediately. Since testing the breakout level, it's been moving higher in a rising channel. The stock hit channel resistance Wednesday and looks like it will pull back here. A downtick below $27.50 should offer a low-risk entry. The next rally leg could break the channel to the upside and take price into the low $30s.
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Alan Farley is a professional trader and author of
The Master Swing Trader
. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback;
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