Bullish on XLU due to expected rotation from tech; targeting 41-45 range via call spread.

Uh but I want to move uh to your next one, Don. You've got the utility sector ETF from State Street here as your second pick. So how are you looking at utilities?

Yeah, this is actually going to be a bullish trade, but it's it's bullish for all the right bearish reasons, if you will. Look, tech starts to sell off at all. And it has had an amazing run.

I believe that we're going to see a rotation back into XLU.

but XLU utilities as we're about to see in the chart in a moment when Rick uh digs into this it is ugly. It is it is ugly but this is the kind of thing I want to gut into okay before it starts to actually make that move.

So I can do that though using a defined risk option spread and that's exactly what I intend to do. So yes, this is going to be a bullish trade, but it's bullish in XLU because I'm looking at a bearish tech move coming, you know, possibly in the next few weeks.

So in XLU, I'm going to go out to the D18 options expiration. Again, D18 options expiration. Giving myself once again the gift of time. Why? Because I'm purchasing an out- of- money spread.

In this case, I'm going to buy the 41 calls. Buying the 41 calls, selling the 45 calls against it. It's a nice $4 wide call spread done for about an 80 debit.

So if you have a spread like this that's an out of the money spread, you're paying 80 cents for it. Again, it is a lower probability trade. But case in point over here, I'm taking a shot.

I'm taking a shot that the rotation happens and we uh we start to rip again inside of the utilities which have just been pummeled in the uh in the year to date, especially from uh some of the recent highs.

Yeah. Yeah, I mean, and even just looking over the last 6 months, I mean, we're down about 13% here. So, we're bearish tech, bullish utilities here for the State Street Select Utilities ETF, Rick.

And as you can see what Don just highlighted there, I mean, utilities have been under a great deal of pressure.

Sure. And, you know, directionality depends on your time horizon, too, as well. I mean, uh, you could still have a bearish view, uh, in the long term and a bullish view in the short term.

You know, all kinds of different setups you can do, but 41 is a level that I was, uh, interested in as well here. We had kind of a repeated low here and then this is where things really started to break down.

Meanwhile, 45, uh, we had a couple of lows here and then a subsequent high roughly around that area. So, that that's kind of the the general area this trade would be targeting.

Some other horizontal levels to watch. 39's where we had our recent lows. We also had our uh significant low point here. We bottomed out there again and then continued our breakdown.

We also had a double top type of high here at 4371 to give a a bit more of a granular level there.

Our 5-day EMA in dark blue representing one week comes in at 3974. Price has crossed above that one. The next one to watch out for our 21-day EMA in teal representing one month at 4081.

RSI improving somewhat here. We were in the oversold area. You can see that threshold of 30. Uh we are starting to climb higher making new relative highs. Downward trend is still in play though and we are still below the 50 midline.

So the the bulls would want to see uh continued highs matching up with price and for that trend line to be broken. uh still quite a bit of work to do to get back above the 50 midline as well.

Our volume profile here shows that we've had a notable pocket of trading volume down here at 39 to 40. So, this is kind of an interesting thing to consider here. Notice as well, we've seen a lot of very heavy volume spikes here recently.

This is suggesting that perhaps an important low point has been reached. It certainly doesn't mean it's going to hold or that it won't go lower, but heavy volume at a at a notable low where we've kind of consistently held this supportive level near 39 is something many traders might take note of.

We can also see if we were to keep climbing a little bit higher, uh 4250 or so to 4350 is where our next volume node comes in to the upside. All right, as we look at it today, it is moving slightly higher today.

We are up about a half a percent here for XLU at 39.88. 88.