"Boring" Sectors Catch A Bid

JC Parets
August 20, 2018

From the desk of Tom Bruni @BruniCharting

Over the weekend as I was doing my run through the entire S&P 500, I noticed some emerging strength in areas that aren't quite as sexy as Medical Devices or Railroads (kidding). Instead, what I found was a number of potential long opportunities in the Real Estate, Utilities, and Telecom sectors. While the long-term relative performance of these sectors is nothing to write home about, as I explained in my Agribusiness post, I still think it's important to point out strength on an absolute basis because it contributes to the weight of the evidence and provides value to those who may have a portfolio approach that includes those areas of the market.

With that said, let's take a quick look at what I'm seeing.

Utilities, which we've discussed here and here, are making new year-to-date highs on an absolute highs. If the sector is above 720, it's likely that prices test their former all-time highs near 780.

Click on chart to enlarge view.

While there are a number of names from this sector hitting new highs, Firstenergy Corp. is an example of a massive base that is just now resolving to the upside, suggesting it may have a lot of room to run.

The Real Estate Sector is in a similar position, making new year-to-date highs and attempting to clear a range it's been stuck in for over 4 years.

Within it, components like Alexandria Real Estate Equities Inc. have formed massive bases of their own and are looking to resolve to the upside and begin, or continue, long-term uptrends.

Telecom is a different story in that it's struggled since a failed breakout in January 2017 sent prices lower. For the last six months it's consolidated in a tight range below broken support, but is now resolving higher.

Within the sector, Cisco Systems Inc. is a name that's been showing relative strength and continues to do so.

The Bottom Line: The individual names in this post aren't really what's important, my real message is that sector rotation continues and there are emerging opportunities in the sectors noted above. A couple of months ago it was Large-Cap Healthcare; this time it's Real Estate, Utilities, and Telecom; and in the future it will be something else. These shifts don't develop overnight, which is why we put in the work to monitor the weight of the evidence so that we can capitalize on them as they occur.

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Thanks for reading and let us know what you think!

Allstarcharts Team

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