Some investors see opportunity with rate-sensitive assets such as XLU and real estate ETFs, noting that 10-year yields are overbought and sentiment against the likes of XLU is at bearish extremes, which could create opportunity from the long side with the utilities sector. [Rethinking Rate Sensitive ETFs]
Looking at XLU’s chart “you can see that the horizontal trendline near $45 has acted as a very influential level of support and resistance over the past 1.5 years. The breakout (shown by the blue circle) and the subsequent retest of the trendline and its 50-day moving average are technical signals that suggest that the bulls are in control of the momentum and that prices could be headed higher. Most active traders will likely look to enter a position as close to the trendline as possible to maximize the risk/reward of the trade. From a risk management perspective, technical traders will likely set their stop-loss orders below the horizontal trendline or the 200-day moving average ($43.23) depending on risk tolerance,” according to Investopedia.
Defensive sectors, such as consumer staples, telecom and utilities, often trade at multiples that are richer than the broader market. That is the price to pay to play defense.
Utilities Select Sector SPDR