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Swing Trade Idea (AWK) – April 4, 2022

After a strong multi-week rebound, equities spent the latter part of last week pulling back as the major indices move lower after reaching overbought conditions. While there are still multiple macro headwinds, investors remain optimistic as shown in recent equity performance. Yields pulled back earlier this week but lack of downside momentum indicates that this is temporary and we will likely see yields continue higher. Commodities remain elevated but have shown more signs of consolidation as investors wait and see if there are any positive outcomes from potential ceasefire negotiations between Russia and Ukraine. 

AWK Bullish Idea: Our bullish idea for today is American Water Works Co (AWK). AWK is part of the Utilities sector which is considered to be a defensive sector. Utility outperformance relative to SPY in recent days speaks to the continued rotation out of growth and into value which has been the predominant theme for 2022. Additionally, AWK’s relative performance against the SPY has started to improve providing a good bullish opportunity for a call debit spread.