Historical data suggest XLU’s moves back above its 200-day line can be a winning trading signal.
“While the sample size is small, it’s encouraging that XLU went on to outperform after retaking its 200-day moving average following six months beneath this trendline. In fact, the fund was higher 100% of the time one, three, and six months later,” notes Schaeffer’s. “More specifically, one month later, the ETF was up 5.21%, on average, compared to an average anytime gain of 0.6%, looking at data since 2003. Three months later, XLU was up 6.4% — more than three times its average anytime gain of 1.9%. Six months after a bullish cross of its 200-day, the utilities ETF was up a whopping 14.05%, on average — nearly four times the norm.”
No sector is as negatively correlated to rising interest rates as utilities, meaning the longer the Fed resists raising interest rates, the longer high-yielding utilities stocks and ETFs remain compelling destinations for yield-starved investors.
For more information on the utilities sector, visit our utilities category.