Recent headlines about the Stock Market have been focused on the strength in Technology stocks which have led the Nasdaq to an 8-week period of positive returns. It’s been 6 years since that index has posted that many consecutive positive weeks. Other headlines point to the impressive 3 week rally in oil prices which have now reversed the prior 2 months of losses. With all this strength, you might wonder which Sectors are holding the S&P 500 back from putting in higher highs.
One losing area is the Utility Sector. Once the darling of investors with their high dividend yields and safe haven reputation, stocks in this top performing group have recently been tossed aside in favor of shinier growth stocks. Using XLU -the S&P Sector ETF- the group is down almost 4% from its recent high.
For those of you who don’t believe the year-to-date uptrend in Utility stocks is over, you may want to take a look at stocks in that group that are exhibiting signs of a possible downtrend reversal. After all, with global negative interest rates it’s hard to imagine that the appeal of Utility stocks has ended entirely.
The stock I’ve highlighted is Southern Co. (SO) and while the earnings profile is not as strong as others in this group, the chart pattern is a great example of a stock on its way to a possible reversal.
The fact that the stock dropped to a 2-month low in price intraday but closed the day at the very top of its trading range is a positive. That it did so on such heavy volume is even more positive. While things look promising, there is still work to be done before the odds of a reversal totally tip in your favor. For one, the stock is currently below its 50 day moving average. It would need to trade above that and even better, retain a presence above it to get more interesting. Also, both the RSI and the MACD are headed in the right direction but have not quite turned technically positive.
I’d suggest putting alerts on this stock and when each of the factors we discussed turn positive, you may want to put some money to work here.
Mary Ellen McGonagle
