The Utilities sector ranks as the third-best performing S&P 500 sector this year, indirectly benefiting from the AI trade, with strong technicals observed in heavyweight NextEra Energy (NEE). NEE is breaking out from a multi-year triangle pattern, supported by a monthly MACD "buy" signal and having cleared the 61.8% Fibonacci retracement at $77, targeting its October 2024 high near $86 in Q4. Its ratio to the S&P 500 confirms an intermediate-term "buy" signal, indicating continued outperformance, while a low beta of 0.40 suggests resilience during broader market pullbacks.
Utilities are the third-best performing S & P 500 sector this year, trailing only technology and communication services, which are more traditional outperformers in strong tapes. It appears utility stocks are benefitting from the AI trade, in an indirect manner, and they look more actionable from a technical perspective than many technology stocks. Sector heavyweight NextEra Energy (NEE) is breaking out from a multi-year triangle pattern in a bullish long-term development. The breakout is accompanied by a monthly MACD "buy" signal, indicating that momentum has shifted meaningfully. We find triangles to be high-probability formations, often because the breakout is not associated with overbought conditions. In this case, the monthly stochastics for NEE have ample room to overbought territory. A shorter-term daily chart shows NEE pushing out of a basing phase. Last week, NEE cleared resistance at the 61.8% Fibonacci retracement level near $77, which supports a full retracement up to the October 2024 high near $86. This move appears achievable in Q4 since momentum remains strongly positive per the daily MACD, and there are no signs of upside The ratio of NEE to the S & P 500 Index (SPX) has confirmed an intermediate-term counter-trend "buy" signal from the DeMARK Indicators, suggesting the stock will be a source of continued outperformance for another several weeks. The ratio has also broken out above the 40-week moving average — an additional positive catalyst in relative terms. NEE has a raw beta of 0.40 versus the SPX, along with a very low correlation (r-squared of 0.06), meaning it should hold up better than most stocks if the broader market pulls back. Initial support lies near the recent breakout point at $77, below which traders may want to place a stop-loss, with secondary support at the 200-day moving average near $71. —Katie Stockton with Will Tamplin Disclosures: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. 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This material does not take into account the particular investment objectives or financial circumstances, objectives or needs of any specific investor, and are not intended as recommendations of particular securities, investment products, or other financial products or strategies to particular clients. Securities, investment products, other financial products or strategies discussed herein may not be suitable for all investors. The recipient of this information must make its own independent decisions regarding any securities, investment products or other financial products mentioned herein. The material should not be provided to any person in a jurisdiction where its provision or use would be contrary to local laws, rules, or regulations. This material is not to be reproduced or redistributed absent the written consent of Fairlead Strategies. The Utilities sector has emerged as the third-best performing S&P 500 sector this year, with an indirect tailwind from the burgeoning AI trade. Sector heavyweight NextEra Energy (NEE) demonstrates significant technical strength, suggesting potential for continued outperformance. NEE is currently exhibiting a bullish long-term development, breaking out from a multi-year triangle pattern, corroborated by a monthly MACD "buy" signal indicating a meaningful shift in momentum. The stock has cleared the 61.8% Fibonacci retracement level at $77, paving the way for a full retracement towards its October 2024 high near $86 in Q4, supported by robust daily MACD momentum. Furthermore, the NEE to S&P 500 (SPX) ratio has confirmed an intermediate-term "buy" signal from DeMARK Indicators and broken above its 40-week moving average, pointing to sustained relative strength. With a raw beta of 0.40 and an r-squared of 0.06 against the SPX, NEE offers a defensive characteristic, suggesting resilience during potential broader market pullbacks.
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