The S&P 500 Utilities index is up almost 4% year-to-date while the broader index is languishing at a 13.5% loss. Despite rising consumer prices, everybody needs utilities, giving traders an opportunity to capitalize on utilities exposure.

“The sector is the second-best performing one in the U.S. behind energy year to date, trouncing the S&P 500 by 15 percentage points through Friday,” a Wall Street Journal article published on May 14 noted. “That leaves utility stocks trading at almost 20 times forward 12-month earnings on average—close to an all-time high and nearly a fifth richer than the S&P 500.”

As mentioned, consumers don’t have much of a choice when it comes to utilities. Despite rising electricity bills, they’ll do anything to keep the lights on.

“As markets fear a recession, being in the business of collecting monthly checks is understandably appealing to investors,” the article added. “Cash-strapped consumers are more likely to pull back on eating out or shopping before risking that the power or gas will be shut off.”^SPXUS Chart

Levering Up on Utilities

Traders looking to play a move higher on utilities can opt for the Direxion Daily Utilities Bull 3X Shares (UTSL). The fund seeks daily investment results equal to 300% of the daily performance of the Utilities Select Sector Index.

From a technical standpoint, the short-term momentum on UTSL looks to stay put especially given the fundamental factor that consumers continue to spend despite inflationary pressures. Back to the technical aspect, the 50-day moving average is still above the 200-day average, once again noting that short-term momentum is still present.

Speaking of which, the relative strength index (RSI) can confirm that momentum further. The current figure, using the chart from a year-to-date time frame, shows 55.97 — this still sits below overbought levels, meaning there could be more room to run for the fund.UTSL Chart

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