XLU trade ideas
Simple growth chart> head and shoulders crossed and retested TheSimple growth chart> head and shoulders crossed and retested The target is the yellow supply area .
OPENING (IRA): XLU APRIL 17TH/JUNE 19TH 52/50 LADDERED PUTS... for a 2.75 credit.
Notes: Another underlying that has been on my IRA shopping list for a bit. The yield is 2.84% here, but would be better with an acquisition at 52, since the annualized dividend is 1.91 (1.91/52 = 3.67%). Only doing two rungs due to liquidity degrading somewhat as you go out in time.
XLU (NEUTRAL) Daily - sell/buy Range - Thu Apr 9, 2020XLU (NEUTRAL) Daily - sell/buy Range - Thu Apr 9, 2020
12:27:22 (UTC)
Thu Apr 9, 2020
ZLU (Utilities) Daily Bearish Risk Range - Wed Apr 8, 2020ZLU Daily Bearish Risk Range - Wed Apr 8, 2020
13:48:00 (UTC)
Wed Apr 8, 2020
XLU Daily Risk Range - 12:55:11 (UTC) Tue Apr 7, 2020Previous Close: 55.79
Upper Bound: 58.60
Blower Bound: 40.94
12:54:34 (UTC)
Tue Apr 7, 2020
GETTING TO KNOW XLU:SPY RATIO AND ITS USEYesterday, I watched a webinar from the CMT Organization website. They hosted Michael Gayed, CFA. Michael was explaining about the XLU/SPY ratio and its use. Today, I decided to analyze it myself and here we go:
Typically the Utilities sector (XLU) serves as a hedge in recessionary times. This sector is made up of companies such as water, electricity, natural gas. Companies within this sector usually offer steady and consistent dividends and are less volatile relative to the general market.
The XLU:SPY ratio suggests that when it breaks out above 240-SMA, XLU tends to outperform the SPY. That is what we could call RISK-OFF. For instance, from November 2004 to December 2007, XLU (48%) outperformed SPY (26%). In December 2007, XLU broke out resistance line, but SPY did not follow the same pattern. Then, prices fell.On the other hand, when the ratio is below the 240-SMA, we call it RISK-ON.
In April 2013, the XLU:SPY ratio confirmed the break out and consolidation below 240-SMA. From April 2013 to February 2020, the SPY (108%) outperformed XLU (70%).
Currently, the ratio XLU:SPY is testing 240-SMA as a resistance. I see there is a negative divergence between XLU:SPY ratio and its RSI. In the XLU:SPY ration, I found a daily SZ that it was not tested yet. My conclusion, we may see higher numbers for the SPY in the following weeks. We need to take a look of this ratio very closely because if it breaks resistance and breaks out above the 240-SMA, and confirm its trend, we can see prices going down for the SPY.
We will see.
Descending Channel on the ETF: XLUAlready formed the descending channel with more than 8 points. The price is touching now the top line. The price should go down in the next hours and we will open a short position near to 47.74 with stop loss close to 49.56 and take profit over the 42.14; Chart: 1H
XLUXLU is looking good. Demand is becoming more anxious (descending wedge). There is a weekly DZ between 48.50 and 49.50. Price may reach that level and then jump until 200 SMA that may act as a resistance. Volume does not show any signals yet. We will see.
XLULong wick shows buyers showing up at support at 1.618 from 2008 crash & cup & handle breakout. No position, just an observation
Utilities - just saying?Looks very interesting right here. Bottom end of the channel. About 2x from the lows in 2009. Sell high flyers and buy Utes!
XLU - you know you are in trouble when Utilities are down 5% XLU (Utilities ETF) is down 5% on the day.... a sign that the market is in trouble....but but.....One could argue that this is "throwing the baby out with the bath water" type of investor behaviour....ie a potential puke indicator to be followed by a rebound
Having said that the major uptrend since the GFC doesnt have big support until 53-54 area (another -10% lower)
You know things are bad....When utilities correct. 2.77% dividend yield and look at the sell volume.
Long Utilities, Short FinancialsWeak soft and hard data, falling sentiment and rising volatility will lead to a risk-off environment. Oil falls sub $50 pushing disinflation and supporting bonds towards a new high.
Lower yields, make a great case to long Utilities hedged by short financials.
How To Rotate SectorsJust compare each sector at the end of each quarter and rotate out weakening sectors and rotate in stronger sectors. Holding the top two or three through each quarter has beaten approx. 70% of the time (if memory serves me right). I can't currently site the numbers but many books have been written that demonstrate positive back-testing. This article explains how to do it using relative strength papers.ssrn.com
XLU uptrend struggles to gain strengthThis technical analysis was conducted using the Swing•Genie Cycles swing trading indicator on a 2-day chart. It typically takes between 1 and 10 days from the time the Swing•Genie Cycles indicator prints a dot on the chart for the trend to demonstrably change. A green dot is a bullish signal, a red dot is a bearish signal. Swing trades using this system typically last 2 to 6 weeks.
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OPENING (IRA): XLU JAN 17TH 52 SHORT PUT... for a .48 credit.
Notes: One of the underlyings on my IRA shopping list, pulling the trigger here on a "not a penny more"* short put at the 52 strike with a resulting cost basis of 51.52/share if assigned on the 52 shortie. The current yield is 3.06% with an annualized dividend of 1.85.
Will look to roll out "as is" at least quarterly for further cost basis reduction until assigned or that's no longer productive.
* -- See HYG "Not a Penny More" Short Put Post, Below.
