Ether a double top or a historic new high moment for UtilitiesReally? We are really counting on Utilities to lead the market by making a historic new high?
Utilities
Continuation towards bearish Bat completion? $XLU is no doubt one of the strongest sectors out there. The bullish setup from 41$ generated impressive rally in time where the markets suffered mostly losses.
Now, as sentiment starting to shift, we may see continuation move towards final target zone of the bullish move - Completion of Bat pattern near 49$
Two zones to monitor in $XLU:
1. 45$ - Currently support (we see that the price is bouncing on it for now.
2. 43-44$- Structure and the daily 200 MA line
Tomer, The MarketZone.net
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MACRO VIEW: XLU STRUGGLING TO GET BACK INTO MACRO UPTRENDSXLU - the SPDR utilities sector ETF is struggling to get back into macro uptrends, while showing no bias on short term.
On long term perspective the price is trading around upper 1st standard deviation from 5-year mean, which is a 5-year uptrend border. The price is also technically in 10-year uptrend, trading above the upper 1st standard deviation from 10-year mean.
Thus one can only say that XLU has restored its long term upward bias if it trades firmly back above 44.
On short term basis price is trading within 1st standard deviation from both 1-year and quarterly mean, showing no directional bias at the moment.
The Case for USA Electric Utilities, even with Rising USA RatesRunning Alpha Capital Markets observes that higher rates are not always a headwind, as the not too distant record shows that the electric utilities group can outperform and offer a margin of safety.
During the last period of higher rates, from mid 2004 to mid-2006, the FOMC hiked rates 16 times, and despite these incremental actions, electric utilities actually outperformed the broad USA equity market indices by a fairly wide margin.
The electrics don't start to significantly under-perform until the Fed funds rate passes the yield of the average electric utility stock; and we will be no where near there even after a number of measured hikes.
Absolute returns on electric utilities are likely to stay rich, regardless of what interest rates do over the next market cycle.
Looking at the average electric utility investor, who are the buy and hold type of market actor, we still have good electric utility yields out there relative to what the Treasuries offer, and on top of that, the electric utilities have attractive balance sheets with good dividend growth and compelling absolute total returns.
OGE Short Trading Plan Update: Time to Take ProfitHi all,
This is an update to the Short OGE Trading Plan, which is about Trading a Double Top Pullback.
Update as of 29 June 2015:
Market has plunged sharply down from $31.20 in the last update to as low as 28.65 on 25 June, and currently hovering at $28.80s.
At this point, the bears have used up much bearish momentum pushing the price to $28.65 and we are see signs of support/ profit taking from the short positions.
For those familiar with Elliott wave, you can recognize that price is likely to try for one more short push towards $28.00.
To re-phrease, yes there is still a bit of momentum for price to try trading towards $28.00.
However, during this attempt it is reasonable to see profit taking and support buying going against this last push down to $28.00.
Hence, we are likely to see choppy trading while price drifts lower in the overall bearish environment.
Taking Profit:
For those who have stuck with the plan and took profit at around $29.00, especially during on 25 June, I congratulate you for following the plan and a trade well done.
For those who have yet to take profit, now might be a good time to take your profits, at the very least closing part of your position out at current price levels.
Given, that a huge bearish momentum has been spent driving prices down from $31.20 to $28.00, it will be rational to close out at the very least 60% of your short position and leave the rest to run.
After all, what's not to like in locking down a 9% Spot Price movement?
Sitting Tight and Leaving a Bit of Money on the Table:
For those who still want to stay short and ride the push towards $28.00, please be mentally prepared to withstand choppy price movements.
Reason being>
a) There is lesser bearish momentum now, therefore there are now lesser traders willing to add short positions and put in selling pressure to the price.
b) Profit taking (buying) is very reasonable to come into play at this levels, creating support for the price.
The closer the price gets towards $28.00 the more likelihood of buying support to come in.
Risk:
By now the risk of the trade becoming a loss is very remote.
At this stage it is a matter of how profitable the market allows you to be and your personal decision when to close out.
At least setting a Stop Limit at $30.00 will be reasonable if you intend to keep your short positions open.
References:
Double Top: stockcharts.com
How to Short a Stock in Double Top Pattern Strategy: www.simple-stock-trading.com
Using Support and Resistance Levels of Relative Strength Index> Technical Analysis for the Trading Professional by Constance Brown, Chapter 1: Oscillators Do Not Travel between 0 and 100.
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$OGE Bearish Trading Plan can now be Executed.Hi all,
This is an update to the Short OGE Trading Plan, which is about Trading a Double Top Pullback.
The Earnings Release on 7 May 2015 showed better than expected results.
This has driven price to open higher at 32.23, reaching as high as 32.38 before closing the day at a loss for $31.96.
This price action shows that the Earnings Release has failed to convince the market to take the long side, leaving the downside as the more likely direction for the Stock Price.
Therefore Short Entry Condition has been met and a Short Trade can be executed for $OGE
Short Entry Conditions:
Only when both conditions a) AND b) listed below are true:
a) If price is does not do a daily close above $33.00 from now.
b) Price can convincingly close a day below $32.00.
Initial Stop Loss: Above $33.00
The reason for this trade is to capture the bearish trend from a Double Top pattern.
Therefore, if price manages to trade above $33.00, it means that the Double Top pattern has failed and the reason to maintain a short position is eliminated.
Shifting of Stop Loss after entry:
If prices manages to trade to $31.50 after entry, we can consider shifting the stop loss lower to $32.00.
The reason is that if price is genuinely breaking out below, it should exhibit a clean strong move downwards $30.00 and below.
Therefore this shifting of stop loss is a conservative approach to protect risk capital.
Taking Profit: $29.00
While the theoretical Double Top target is $28, it is better to use a more conservative target of $29.00.
Advanced traders can also look to take profit when RSI (14) is close to reaching the 28.0000 level.
Risk:
The is a risk that this is a fake continuation move. If a fake move occur we can consider flipping around, covered in the next point.
Flipping Around if Short Squeezed:
In the event that price manages to trade back above the neckline of $33.00, it will mean that the Double Top pattern has failed and the short position will incur a loss.
It is also likely that this failed pattern will lead to a short squeeze move with enough momentum to push prices higher to around $35.50.
Therefore more advanced traders may consider turning around and go long above $33.00 to capture this short squeeze momentum.
References:
Double Top: stockcharts.com
How to Short a Stock in Double Top Pattern Strategy: www.simple-stock-trading.com
Using Support and Resistance Levels of Relative Strength Index> Technical Analysis for the Trading Professional by Constance Brown, Chapter 1: Oscillators Do Not Travel between 0 and 100.
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Is FTR A Good Investment Candidate ??This is a WEEKLY chart of FTR. You are looking at about 7 years of history...
FTR just recently bought some assets from Verizon. I would say the stock ran up on the purchase and now it is falling back to the uptrend line that started back in early 2014. Is FTR a good investment candidate at this point in time?
Let's look at the best part of the chart first. Yes, it is the downtrend line. A SEVEN year downtrend line! If you are going to consider FTR a good investment candidate it can' t be in a downtrend. I would comfortably say the downtrend is over. I could be wrong but I will feel pretty comfortable as long as the price stays above uptrend line #1.
What is the next thing I like about this chart? I like that there are 3 uptrend lines I was able to draw. Each of them is steeper than the last. Now this won't go on forever but it tells me that the amount of buying in the stock is increasing and the amount buyers are willing to pay is also increasing. Maybe it will just stay at the current pace and the price will follow uptrend line #3. If that is the case, then I would expect to make >5% per quarter including the current dividend. Yes, I said "greater than 5% per quarter".
This idea is sounding way too rosy at the moment so lets talk about the risk. The risk is that FTR is not going to stay above uptrend line #3. There is also a risk that it won't stay above uptrend line #2 or even uptrend line #1. There are many ways to protect yourself between now and those possible breaches but anything is possible. Your first high probability downside bet would come into play if FTR closes below uptrend line #3. The longer the price stays below uptrend #3 the better the chances are the stock price will continue to fall to uptrend line #2. After that it could drop to uptrend line #1 or below.
If you are not worried about how rosy this idea is sounding and you are curious about going long, let me tell you what I see in the chart. At the moment, I would say FTR is coming back to a level that investors feel comfortable with. What is that level? Your guess is as good as mine. My guess though is uptrend line #3. From the time the downtrend line broke in early 2014 to now, uptrend #3 is the place where the stock has found support. Maybe it will happen again.
There are a couple horizontal lines of potential support I see on the chart as well. These could also be places where the stock price decides to turn around and continue its ascent. Those levels are $7.10 and $6.80 "ish". I would not buy stock in anticipation of these levels working. I would wait and watch to see what the action looks like at these levels. Why? Well if you buy tomorrow anticipating a turn around at $7.10, and it doesn't happen, you will lose money until it does turn around. If FTR continues to fall to uptrend line #3 you could lose about 9% of your investment. The point is to buy as close to the support level as possible IF you see signs of the turn around.
If you are buying for a long term investment and the dividend FTR offers, you might feel like there is no reason to wait. And you may be right to a point. But I will offer this. Assume a $1000 investment. Every $0.25 less you pay for the stock equals about 5 additional shares. Those 5 additional shares (per $1000 invested) means 5 less ten and a half cent dividends every quarter from now until you sell the stock. What if this is the beginning of a 7 year uptrend in FTR? Those lost dividends would add up over time! Not to mention the compounding you would lose out on as well.
US Market Sideways to Downside Risk in 2015Intermarket Study for 2014
Utilities - XLU - and Health Care - XLV - Outperformed in 2014, and these two sectors saw the biggest % gains later in the year. Health Care and Utilities are considered economically insensitive sectors, and tend to outperform when the market is at risk of a pullback or a sideways markets. Historically, economically-sensitive sectors like consumer cyclical, industrial and energy stocks tend to outperform the stock market in a healthy uptrend.
Go Long on Utilities XLU, If You've Missed Shorting Oil Following OPEC's decision to not to reduce Crude oil production on 27 Nov 2014 Thursday, we note a steep drop on Oil related stocks (ie XOP) on Black Friday Morning.
Share prices of Airlines have also continued rally on the upside (ie DAL).
While we may run the risks of pullbacks if we were to join the Short Oil/ Long Airlines positions, here is an idea on Utilities Select Sector ETF (XLU), which is poised to follow suit for a breakout.
(1) Price has traded steadily in an upwards trend channel starting from June 2010 and up till now. Price has risen from about $28.00 to $46.00 now, trading and sustaining past the 2008 high of $44.40.
(2) Starting from 19 June 2013, we note an acceleration trend line has been formed, based on the lows of the prices, marked by the purple line.
This acceleration of prices has brought prices to break out of the upper trend line of the channel, for the second time.
It is an indication that market is gaining momentum for a strong vertical breakout in prices on the upside.
Seasoned Elliott wave traders should also recognize that a potential 5th Impulse wave will be formed upon breakout.
(Projection)
Very Bullish: From observations raised in points (1) and (2), we conclude that price is most likely to accelerate further from current price level and "liftoff" to a close to vertical breakout on the upside.
(Stop Loss)
Below $44.80.
(Target)
$50.00. (About 8% return from current price levels)
(Time Limitation)
This vertical breakout should reach the price target by 06 Jan 2015.
(Risk)
There is always the risk of a false breakout, where price will be resisted at the previous high of around $46.60s.
References:
News on OPEC's Decision
www.bloomberg.com
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