On Friday, I received a StockCharts Technical Alert in my email inbox letting me know that the Equal-Weight Utilities ETF (RYU) had triggered a new Intermediate-Term Price Momentum Oscillator (PMO) BUY signal. I immediately had to check out the weekly chart.
There is a clear breakout from a declining trend channel and that PMO BUY signal is in historically oversold territory. The 17-week EMA managed to stay above the 43-week EMA suggesting some strength.
To drill down further, I went into the DecisionPoint "Straight Shots" ChartPack to the RYU ChartList which includes all of the primary DP indicators for that ETF. Below is the intermediate-term indicators, the ITBM and ITVM. Note that they are in decline and the short-term PMO is about to have a SELL signal. The ITVM appears to be decelerating and attempting a positive crossover its signal line, but the trend is down. The short-term target is around $84 and could move higher, but I temper that expectation given the ITBM and ITVM.
Conclusion: The intermediate-term PMO BUY signal may've arrived late, but typically BUY signal in the bottom of the range are "good" and tend to pan out more often than not. Based on sector rotation guidelines, the Utilities sector should begin doing well if a market correction gets into swing. I think conservatively, $84 is a good target, but with IT indicators looking bearish, I would set stops accordingly.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Erin
