Utilities Look Strong, but All Eyes Are on the Fed’s June Meeting

Amid Mounting Utility Challenges, How's PPL Corporation Looking?

(Continued from Prior Part)

Will the trend reverse for utilities?

As interest rate hike expectations are warming up on the Street, utilities have started showing weakness in the past few trading sessions. However, utilities showed rapid recovery too, after losing nearly 5% on the release of the minutes of the Fed’s April meeting.

Notably, PPL Corporation (PPL) has rallied by more than 15% since the start of the year, and it’s still looking strong. Xcel Energy (XEL) and Consolidated Edison (ED) have also soared more than 15% in the same period.

Momentum oscillators

PPL is currently trading at 2% and 10% premiums to its 50-day and 200-day moving averages, respectively. The surge in utilities after falling last week (ending May 27, 2016) has shown that they may have more upside in the near future.

But it will be interesting to see what the Fed decides in its June meeting. Rate hike expectations can weigh heavily on utilities’ price movements, and if PPL’s stock price breaks below its 50-day moving average, it could be considered a trend reversal. Investors should note that PPL did touch its 50-day moving average this month but managed to rise afterward.

PPL’s RSI

The stock climb in 2016 has resulted in a strong rise of PPL’s RSI (relative strength index). It currently stands at 60, though it nearly reached 70 earlier in May. RSI is a momentum indicator made up of values between zero and 100. Movements below 30 are considered to be in the “oversold” zone, and movements above 70 are considered to be in the “overbought” zone.

Now let’s take a look at PPL’s operational performance.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Inside PPL Corporation’s Pure-Play Regulated Status, with Global Presence

• Part 3 - What’s Poised to Drive PPL’s Growth in the Future?

• Part 4 - Understanding PPL’s ROE after the Sell-Off of Its Merchant Power Segment