While utilities stocks have been among the worst performers this year, the sector and related exchange traded funds could be primed for a rebound.
Since the high at the end of January, the Utilities Select Sector SPDR (NYSEArca: XLU) has declined 10.2%.
Following the 10% correction, value investors may find a bargain in the utility sector. For instance, Evercore ISI’s head of technical analysis, Rich Ross, points to the pullback in the PHLX Utility Sector Index (UTY) as an opportunity to buy, reports Amanda Diaz for CNBC.
Looking at the charts, the utilities sector has been on a strong uptrend over the past 12 months, Ross said. In the recent months, we have witnessed a sharp turnaround from the January highs.
“What I think, is that this has created a compelling buying opportunity,” Ross said.
Specifically, Ross points out that the pullback in utilities has brought the index back to a critical support level and prior resistance.
“Technical analysis teaches us that prior resistance becomes new support on a pullback, and that’s exactly what’s happened here with the utilities,” Ross added.