Volume patterns suggest astute investors are buying these two utilities stocks, both of which are good buys for yield- and safety-oriented buyers.
As I noted in January, the seasonal analysis indicated that the Select Sector SPDR - Utilities (XLU) “typically tops in late December and bottoms in March.” There were also technical signs at the end of 2011 that the best-performing sector in 2011 (up 14.8%) was forming a short-term top.
Even though XLU is down just under 3% in 2012, individual utilities like Dominion Resources (D), which is the ETF’s second-largest holding, is down 4.9%. Dominion pays an annual dividend of $2.11, and at the end of 2011, it was yielding 4.02%. Following the correction, it now yields 4.20%.
These two gas utilities saw large volume increases on Wednesday and closed strong. This suggests that once again, the big money is moving back into these utilities stocks to capture the attractive yields and capitalize on more defensive plays.
Chart Analysis: The weekly chart of the Select Sector SPDR - Utilities (XLU) shows the December high of $36.27 as well as the decline to a late-January low of $34.14.
- XLU is the middle of its weekly trading channel, lines a and b. The panic selling last August took XLU to a low of $29.45
- There is next resistance at $35.20-$35.40 and then at $36.00
- Seasonal trend analysis shows that XLU typically tops in late December and bottoms near March 16 before rallying into early June
- There is a secondary high in early September and then another low in the middle of October
- The daily relative performance, or RS analysis (not shown), has moved back above its weighted moving average (WMA)
See also: The 4 Key Seasonal Trends for 2012