(Premium) Not Much Use for Utilities

Losses in the Utilities sector have been outpaced by only the Financials so far this year.

On a relative basis, there’s no good reason to own the Utes right now. The sector is getting rejected once again by overhead supply, and we’re below a declining 200-day moving average. This is a textbook downtrend.

(click charts to enlarge)

If Utilities convincingly move back into last year’s trading range, we can reassess the situation and start looking for long opportunities. But that isn’t where we are today.

If we do see a change in the investing environment and we want to get long Utilities, keep an eye on Atmos Energy. This is the type of clean setup we’re looking for. ATO is near the top end of a multi-year consolidation range in the midst of a long-term uptrend. We should expect this consolidation to resolve in the direction of that underlying trend. If it’s above 120, we can be long with a target of 145.

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