Utility Stocks Take It on the Chin

Tickers in this article: D SMA ED EXC ETR
NEW YORK ( TheStreet) -- Investors had been flocking into utility stocks, for the dividend yield, since the stock market lows of March 2009. I became concerned about the sustainability of the uptrend for the Dow Jones Utilities since July 30, when I wrote Consider Taking Profits on Utility Stocks .

On July 30, I profiled the Utilities Select Sector SPDR (XLU) , which then had a dividend yield of 3.6% versus a yield of 1.553% on the U.S. Treasury 10-year note. Today the dividend yield on XLU is 3.49% and despite the QE3 initiatives announced by the Federal Reserve on Sept.12, the yield on the U.S. Treasury 10-year note is up to 1.691% this morning.

Third-quarter earnings reports have not been kind to utilities stocks as the pattern for the majority of power companies has been to miss on both earnings per share and on the revenue line.

On July 30 www.ValuEngine.com showed that the utilities sector was the most overvalued of the 16 sectors by 12.9%. Today the utilities sector is 7.2% overvalued and six of the 16 sectors are more overvalued than utilities. Today I profile eight utility stocks and all are down since July 30 and are below their 200-day simple moving averages.

This week we have seen the Dow Jones Utility Average (DJU) plunge below its 200-day SMA at 469.00, as shown on the chart below. Daily momentum has become oversold, but the weekly chart profile is negative. Dow utilities are down 0.5% year to date diverging from the 8.4% year to date gain for Dow industrials. My proprietary analytics does not show a nearby value level and my weekly, monthly and quarterly risky levels are 477.82, 498.29 and 499.85.

Chart Courtesy of Thomson/Reuters

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last twelve months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next twelve months. Stocks with a black number in the table are projected to move higher by that percentage over the next twelve months.

Value Level: The price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.