An Exciting Week For An Often Boring Sector

Excitement and the utilities sector do not often go hand-in-hand, but a slew of earnings reports due out this week could add some spice to the normally docile group.

Traders looking to increase the spice with the utilities trade can consider the Direxion Daily Utilities Bull 3X Shares UTSL, the dominant name among leveraged exchange traded funds (ETFs) tracking utilities stocks.

What Happened

UTSL attempts to deliver triple the daily returns of the Utilities Select Sector Index (IXUTR), one of the most widely followed gauges of utilities stocks. To this point in the earnings cycle, each of the 11 sectors in the S&P 500 are reporting year-over-year earnings growth.

Each of the S&P 500 utilities companies that have reported thus far have delivered year-over-year growth and only one sector, consumer discretionary, has delivered more earnings surprises than the utilities sector.

Why It's Important

Just three sectors have smaller weights in the S&P 500 than does utilities, meaning leveraged utilities funds can go overlooked relative to other geared sector ETFs. This week, however, UTSL should be ignored because seven of the top 10 components in the Utilities Select Sector Index deliver second-quarter earnings results.

Dominion Energy D and Sempra Energy SRE get the party started Monday with five more reports coming from Tuesday, July 31 through Thursday, August 2.

Some data points suggest traders are eyeing UTSL in anticipation of this week's earnings avalanche. For the five days ended July 26, volume in UTSL was more than 48 percent above the trailing 20-day average, according to Direxion data. That puts UTSL in the top 10 among Direxion's leveraged ETFs for volume increases over that period.

What's Next

UTSL is up about 4 percent over the past month and its chart suggests that a high-volume move above $28 could indicate a breakout. The ETF trades 23.35 percent below its 52-week high set in November.

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