It isn’t every day that some of the biggest edges are hiding in the utilities sector.
But as traders and investors take profits in the wake of sizable runs in stocks from Duke Energy (NYSE: DUK) to Southern Company (NYSE: SO), the only people not selling utilities stocks are those wondering when to get in.
Utilities stocks have been some of the best performers in recent months. The Utilities Select Sector SPDRS ETF (NYSE: XLU), for example, rallied to a new, 52-week high just last week, after gaining more than 15% in 2011. Utilities stocks like Nisource Inc. (NYSE: NI) soared by more than 30%.
So it isn’t surprising that who have enjoyed these great gains have decided to take at least some profits off the table. The important question is what kind of potential opportunity any sustained profit-taking – or even profit-taking turned to panic selling – might create for for the rest of the active investing community in the short-term.
Heading into trading on Thursday, all three of the utilities stocks in today’s report are on pace to open in oversold territory. Shares of Duke Energy closed lower for a third day in a row on Wednesday to finish oversold for the first time in a month. Also trading marginally lower ahead of Thursday’s trading is Southern Company, though Wednesday’s finish marks SO’s second consecutive close in oversold territory rather than merely its first.
And pulling back by nearly 1% on Wednesday has also lowered Nisource to levels where buyers historically have begun to test the market. Wednesday also was the third lower close in a row for shares of NI.
All three stocks have neutral ratings as of Wednesday’s finish, although Southern Company stands a point above the others with its 7 out of 10 rating. As such, additional selling in the second half of the week will be required to bring these stocks up to “consider buying” territory as far as their ratings go. Lastly, of the three, Southern Company has a slightly larger, positive, short-term edge of more than half a percent.
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David Penn is Editor in Chief of TradingMarkets.com.