This week’s Chart of the Week features XLU (Utilities Sector ETF) which fell by 8.13%, immediately after reaching all time highs, over the last month. When looking at XLU’s chart, it appears that this sudden and sharp drop is a minor correction in a broader bullish picture. We saw two drop which looked very similar in 2017 and both provided excellent buying opportunities. Last week, XLU tested and bounced off strong support around the $51 level and we expect $51 to be the bottom of this decline. This week, we are looking for a move up to the $51 level which is the top end of a channel that XLU traded in February through May. The Relative Strength Indicator (RSI) for this ETF is also displaying a vivid indication of a bottoming process. The two previous corrections in 2017 were accompanied by a series of channels in the RSI, with a downward trending channel to the oversold conditions (30) on the RSI leading to an upward trending channel to the overbought levels (70). The RSI has now gone into severe oversold levels and a bounce is clearly coming. Our ultimate price target for this call is a move to the 50 day moving average (and uptrend line from 2017) at $54.67.
Farewell and Trade Well,
Founder and Editor-in-Chief