Tuesday, September 20, 2011

XLU Watch

Who knew your grandparents' boring old utility stocks could be such a hot play?

XLU, the exchange-traded fund that tracks utilities, broke decisively above the 20-day Donchian price channel as a continuation of a wild roller coaster ride that kicked in last April.

Volatility plus a 3.9% dividend parcelled out monthly -- what's not to like?

sym phase trend adx   200/50 40/10

XLU opened above the price channel this morning after testing that level twice in three days.

The move comes on a bounce from a 14% drop beginning July 22 and is being accompanied by volume pushing double that of Monday.

That's after a rise of 12% that occurred from March 16 to May 20.

One explanation that's making the rounds is that money is getting nervous about stocks, and flowing out into more defensive areas, such as utilities.

Although, in my book, defensive means gold, or Treasuries, or short sales and puts, or under my futon. It certainly isn't an exchange-traded fund whose annual return is about equal to twice the average daily price movement of the last 10 days.

Accepting a 3.9% return over a year on an equity that recently lost 14% of its value over a dozen trading days doesn't seem like safety to me.


  • phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
  • trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for neither.
  • adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
  • 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
  • 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.

About my trading methods

Read a detailed explanation of my analysis method, including trading rules.


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.

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