However, several indicators are now signaling the utilities sector is overbought and that investors have overextended themselves, according to an analysis by SentimenTrader's Dean Christians.
Whenever the percentage of utility sector stocks trading within a 252-day high surpassed 95%, the extreme overbought condition was likely to mark the end of a favorable period for the utility sector, according to SentimenTrader.
"Over the following year, the group exhibited unfavorable returns and win rates. The situation was especially dire in the near term, with the sector declining 89% of the time in the subsequent month," Christians said.
Data shows that the utilities sector tended to decline over the subsequent three months, with several time frames exhibiting significantly worse returns than random returns over the study period, according to SentimenTrader.
"Like the overbought signal, the overall market saw solid performance, suggesting that utilities' recent outperformance may have been influenced by a macro factor that benefited most stocks, such as falling rates," Christians said.