The utilities sector has the best sector performance so far in 2016, with a gain of 6.7% vs. the year-to-date loss of 5.1% for the S&P 500 . And for both gains and dividends, the utilities sector exchange-traded fund to buy is the Utilities Select Sector SPDR Fund (XLU) . Its three largest holdings, Duke Energy (DUK) , NextEra Energy (NEE) and Southern (SO) , are outperforming the ETF year to date, with gains of 7.9%, 8.7% and 6.6%, respectively, vs. 5.9% for the ETF.

Utilities are in the midst of earnings season. Helping the sector was a better-than-expected report from NextEra on Jan. 28. Southern reports before the opening bell on Wednesday, and analysts expect the company to earn 42 cents a share. Duke Energy is not scheduled to report until Feb. 18, and analysts expect the company to earn 95 cents a share.

The ETF has a dividend yield of 3.88%. Duke's yield is 4.38%, NextEra's yield is 2.76% and Southern's yield is 4.44%.

Back on Dec. 11, I wrote, "Buy Duke Energy, Southern for Dividends, Avoid Utilities ETF," and this defensive strategy proved to be successful for prudent investors. 

Here's a scorecard for the utilities ETF and its three largest components, with their ETF weightings.

 

Here's the weekly chart for the utilities ETF.


Courtesy of MetaStock Xenith

The utilities ETF closed Monday at $45.85, up 5.9% year to date. It is 12.4% above its 2015 low of $40.80, set on Aug. 24.

The weekly chart is positive, with the ETF above its key weekly moving average of $44.09 and above its 200-week simple moving average of $40.60.

The weekly momentum reading is projected to rise to 69.53 this week, up from 58.19 on Jan. 29. Momentum scales from 00.00 to 100.00 with a reading below 20.00 oversold and a reading above 80.00 overbought. A rising reading above 20.0 is positive while a declining reading below 80.00 is negative. This study is shown in red along the bottom of the chart.

Investors looking to buy XLU should place a good-till-canceled limit order to buy the ETF if it drops to $44.69 and $42.59, which are key levels on technical charts until the end of this week and to the end of February, respectively. Investors looking to reduce holdings should place a GTC limit order to sell the ETF if it rises to $48.87, which is a key level on technical charts until the end of March. A key level of $45.58 should be a magnet until the end of June.

Here's the daily chart for Duke Energy.


Courtesy of MetaStock Xenith

Duke Energy closed Monday at $77.00, up 7.9% year to date. It is 17.6% above its 2015 low of $65.50, set on Dec. 3.

The weekly chart is positive, with the stock above its key weekly moving average of $72.82 and above its 200-week simple moving average of $71.28. The weekly momentum reading is projected to rise to 76.81 this week, up from 68.81 on Jan. 29.

Investors looking to buy Duke should place a good-till-canceled limit order to buy the stock if it drops to $68.47 and $67.32, which are key levels on technical charts until the end of February and the end of 2016, respectively. Investors looking to reduce holdings should place a GTC limit order to sell the stock if it rises to $78.95, which is a key level on technical charts until the end of March. A key level of $76.36 should be a magnet until the end of June.

Here's the weekly chart for NextEra Energy.


Courtesy of MetaStock Xenith

NextEra closed Monday at $112.98, up 8.7% year to date. It is 20.5% above its 2015 low of $93.74, set on Sept. 11. The stock set an all-time high of $113.44 on Monday.

The weekly chart is positive but overbought, with the stock above its key weekly moving average of $109.76 and well above its 200-week simple moving average of $88.66. The weekly momentum reading is projected to rise to 85.74 this week, up from 81.48 on Jan. 29, becoming more overbought.

Investors looking to buy NextEra should place a good-till-canceled limit order to buy the stock if it drops to $104.11, which is a key level on technical charts until the end of February. Investors looking to reduce holdings should place a GTC limit order to sell the stock if it rises to $115.64, which is a key level on technical charts until the end of March.

Here's the daily chart for Southern.


Courtesy of MetaStock Xenith

Southern closed Monday at $49.90, up 8.7% year to date. It is 20.5% above its 2015 low of $41.40, set on June 26.

The weekly chart is positive but overbought, with the stock above its key weekly moving average of $47.48 and above its 200-week simple moving average of $44.68. The weekly momentum reading is projected to rise to 87.60 this week, up from 84.35 on Jan. 29, becoming more overbought.

Investors looking to buy Southern should place a good-till-canceled limit order to buy the stock if it drops to $47.20 and $46.02, which are key levels on technical charts until the end of February and the end of 2016, respectively. Investors should reduce holdings with the stock above a key level on technical charts of $49.23, which should be a magnet until the end of March.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.