Trading the Pullbacks in Power Stocks and ETFs

In this season of Thanksgiving, is there a group of equities more overdue for a show of thanks than the utilities stocks?

And not just because utilities stocks typically provide investors with reliable dividends in addition to low volatility and modest capital appreciation over time. First and foremost, utilities provide the power and connectivity that makes our 21st century economy work. No less than transportation stocks – and in many ways more – utilities stocks are among the unsung heroes of the stock market, just as utilities are the unsung heroes of modern life.

That said, utilities stocks have been selling off along with the rest of the market in recent days. Looking at the sector through the lens of exchange-traded funds like the Utilities Select Sector SPDRS ETF (XLU) and the First Trust Utilities AlphaDEX Fund ETF (FXU), utilities stocks in general have finished lower for three days in a row and are deeply oversold.

XLU remains above its 200-day moving average, trading in bull market territory since rallying from its lowest levels of the year in early August. The pullback in XLU has allowed the fund to maintain its high “consider buying” rating ahead of Friday’s open. ETFs with this rating have pulled back to levels at which buyers have historically re-entered the market.

FXU, on the other hand, has slipped into bear market territory during the recent downturn. And while some traders will choose to avoid the ETF on that basis alone, it is worth noting that the fund has earned a top 9 out of 10 rating as of Wednesday’s close. The ETF was lower by nearly 2% in trading on Wednesday, finishing down for a third day in a row and deeply oversold short term.

Among the stocks that are weighing down the sector, but are still trading in bull market territory are shares of companies like Questar Corp (STR) and Constellation Energy (CEG). STR has closed lower for six days in a row, the last three in oversold territory. CEG has closed lower for seven out of the past eight trading days, and is also oversold. Both of the sell-offs in STR and CEG represent profit-taking, perhaps turning into panic selling, as the stocks retreat from 52-week highs.

The ETFs and stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.

David Penn is Editor in Chief of