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Special Sector Report - Get Ready!



August 29, 2011 – Comments (0) | RELATED TICKERS: SO , AEP , DUK

All of the major stock indexes have been extremely volatile since the May 2, 2011 high on the S&P 500 Index. Most leading stocks continue to trade below their daily chart 50 and 200 moving averages. While many stocks continue to struggle, there is one sector that has held up very well and continues to signal strength. The group of stocks that remain very strong at this time is the utility sector. In this report, we shall examine three different leading utility stocks that continue to look strong on the charts. It is important for traders to remember that most utility stocks will usually trade higher in a low interest rate environment. Recently, the Federal Reserve stated that they will keep the Fed funds rate at zero – quarter percent until 2013. Utility stocks could continue to be market leaders for quite some time to come as long as rates remain low.

The first stock that we shall examine is Southern Company (NYSE:SO). This leading utility company offers electric service primarily in Alabama, Georgia, Florida, and Mississippi; and serves approximately 4.4 million retail customers. This stock recently made a new 52 week high last week at $41.30 a share.  SO is slightly overbought at the moment and may need to consolidate before trading higher. Therefore, should the stock pullback traders can watch for daily chart support around the $39.00 area. Should the stock continue to rally higher there will be resistance around the $43.00 level.

American Electric Power Inc. (NYSE:AEP) is another leading utility company. This stock topped out on July 5, 2011 at $38.98 a share. Traders and investors must continue to watch the $39.00 area for resistance. It is important to remember that this stock has surged higher since August 9, 2011 when the stock traded as low as $33.09 a share. Therefore, the stock may need to pullback or consolidate before trading higher, Traders can watch for short term support around the $35.00 level. 

Other leading utility stocks that are holding up very well include Consolidated Edison Inc. (NYSE:ED), and Duke Energy Corp. (NYSE:DUK). Traders must remember that many investors buy utility stocks for the dividend payouts. Most often utility stocks will trade higher in a low interest rate environment. If yields rise on 10 and 30 year bonds it would be prudent to expect these stocks to trade lower. Understand what moves stocks and sectors, master your charts and make money.  

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