STOXX Europe 600 Utilities: a winner for 2018

5 years ago - Published by SAMT in Technical Analysis

Last year the European stock market was one of the least performing: the Stoxx 600 Index closed with a loss of more than -13%. The only STOXX 600 Super Sector survived with a modest loss of -1,7%, is the STOXX Europe 600 Utilities Index.

If we calculate the performance from January 2018 to date, this Super Sector has the highest positive performance (+3.72%). Only two other Super Sectors are positive: the Media sector (+0.90%) and the Healthcare sector (+0.18%). The other sixteen Super Sectors are all negative.

If we look at a medium-term daily chart, we can also see other singularities of this Super Sector: a couple of weeks ago the price has broken the down trendline of a symmetrical triangle (a), and it is currently at the same level of the previous late April high. In these last few days the 50-day moving average up crossed the 200-day moving average, confirming the price trend (b). A the moment this is the only Super Sector with price and 50-day moving average above the 200-day moving average.

However, in the long term this sector does not yet reveal data showing adequate strength to develop a good medium-term trend: if we look at prices on a 30 years long term monthly chart, we can note two bullish markets periods in 1989-2000 (1) and in 2003-2007 (2). Then a modest rise between the end of 2013 and the end of 2014 (3), and after that, the movement was quite flat; in the last years the index is contained in a sideways trend channel (4). The oscillator is also flat (5) and therefore it is necessary that the prices have enough strength to be able to get out of the current situation.

Two interesting signals lead us to monitor the progress of this Super Sector. The first is that at the beginning of December the relative strength ratio exceeded its 200-day moving average (A). The second is that the relative strength ratio of the European Super Sector, compared with the MSCI AC World Utilities index, started, always in the same period, a short-term bullish leg that is moving towards the historical long-term bearish trendline (B).

Mario Valentino GUFFANTI CFTe – SAMT Vice President – Swiss Italian Chapter – mario.guffanti@samt-org.ch

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.