Thursday, 27 September 2012

Quick Technical Charts - Utilities Sector ETF (XLU)

Meant to post this yesterday but here's a chart update on the Utilities Sector ETF.

XLU is an ETF representing the utility equities and so is typically a defensive play and/or a dividend play.  As you can see below, XLU hit a peak at $39 back at beginning of August after an extremely strong run from the lows of $33.5 back in April.  As a defensive play, XLU normally is relatively stable so the run to $38 is a bit fast so it was overdue for a drop.  It fell to a low of $35.8 a week ago and looks to have formed a short term bottom.  Various indicators look like XLU is positioning itself for a rebound (doubly so if the equities market drop back down as it has been for the last few days).

XLU is yielding almost 4% so as a safe play, its a decent one.  At worse, you end up with 4% much are your treasuries again?  There is a significant risk in that this drop never took it back down to its recent lows so it was never retested and confirmed as a support point.

Disclaimer: Took a small short term position in XLU as way to hedge a market drop.

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