The so-called shelter utilities sector traded at a discount of 7% for the broad S&P 500 Index through the first half of 2020, while investors are fleeing the group for the businesses on the point of benefit of the pandemic and to jump into the market darling FAANG stocks. However, the under-performing utilities segment took up an offering on Wednesday after the June minutes of the Fed revealed FOMC members have stressed the need for long-accommodative monetary policy in the midst of ongoing uncertainty and considerable risks for the economic outlook.
Years of low interest rates to make utilities stocks more attractive as investors chase better-paying and yields. Currently, the sector provides an average of 3.95% in yield compared to the fair 0.673% for the U.S. 10-year Treasury Note. In addition, the debt service becomes increasingly affordable and high capital intensity of the utility companies, allowing them to continue the financing of the infrastructure for future growth.
Below, we examine three lighthouses of the utilities of players, and to identify the technical levels to watch.
NextEra Energy, Inc. (NEE)
NextEra Energy, Inc. (NEE) generates, transmits and distributes electricity to approximately 5 million retail and wholesale customers in North America. Florida-based power supplier disclosed first-quarter adjusted earnings of $2.38 per share on total revenues of $ 4.6 billion. The two measurement systems has exceeded the expectations of the Street and has increased by 8.2% and 13.2%, respectively, compared to a year earlier. The analysts have a 12-month price target on the security to $260.40, indicating a 6% increase from Wednesday’s $246.26 close. July 2, 2020, NextEra Energy shares $120.53 billion dollars of market capitalization, offers a 2.33% dividend yield, and are trading at 2.85% higher on the year.
The stock has fluctuated within a orderly manner 30 points ascending channel since mid-April, providing multiple high-probability configurations for those who favor range-bound strategies. Swing traders should consider buying the recent dip, which is an important support of the lower trendline and is closely aligned to the 50 and 200-day simple moving averages (SMAs). In terms of commerce, management,, aims to reap profits near the channel’s upper trendline around $270, and the protection of capital with a stop-loss order placed under this week’s low of $233.76.
Xcel Energy Inc. (XEL)
Minneapolis-based Xcel Energy Inc. (XEL) provides electricity and natural gas services to over 5 million customers, primarily in the Midwest of the states. Despite the $33.71 billion energy giant reports an 8.2% year-to-year decline in first quarter earnings, management expects full year earnings growth of between 5% and 7%. The company also intends to increase its dividend rate and is aiming for a payout ratio of 60% to 70%. July 2, 2020, Xcel Energy stock of a 2.75% dividend yield and has gained 2.45% year to date.
Throughout the sars coronavirus pandemic, Xcel Energy shares have formed a large symmetrical triangle which gives well-defined support and resistance areas. The stock rallied nearly 3% compared to the lower model of the trendline and 200-day SMA Wednesday, in a move that may lead to a break in the next trading sessions. Those who enter at these levels should look for a retest of the 52-week high just above$ 70, but cut losses on a breakdown below the triangle lower trendline.
Duke Energy Corporation (DUK)
Duke Energy Corporation (DUK) distributes and sells a regulated public utility with over 7 million customers in the Carolinas, Indiana, Florida, Ohio and Kentucky. The company missed analysts ‘ first-quarter profit expectations and saw its top line to contract by 3.5% from the month of March, 2019 quarter due to the milder winter weather and severe early spring storms. On the valuation front, the energy supplier is trading at about 16 times this year’s earnings, slightly below its five year average multiple of 17 times. July 2, 2020, Duke Energy’s stock is down 8.1% year to date, but has added nearly 7% over the past three months. Investors receive an attractive 4.73% dividend yield.
Duke Energy shares have remained stuck in the three-month trading range after an initial sharp rebound from their March 23, capitulation low. The stock has support near of the beach below the trend line and the psychological $80 level this week, with gains of acceleration by Wednesday of the session. In addition, a relative strength index (RSI) reading below 50 gives price plenty of room to march in the direction of the overhead resistance at 92.5, prior to consolidation. Merchants should limit the downside with a stop located below the June low at $77.58.