Higher yields have sent utilities tumbling 11 percent year to date, making it the worst-performing sector in the S&P 500 over that period. But according to one top technician, the selloff is "overdone" and the space is now presenting an attractive buying opportunity in the near term.
"We know the relationship [between yields and utilities] is inverse, but at some point a lot of it becomes priced in, at least in an intermediate basis," technical analyst Carter Worth said Friday on CNBC's "Options Action."
Worth noted that despite a recent uptick in the U.S. 10-year yield, which is sitting just under 2.4 percent, the chart is butting up against long-term downtrend resistance. This as the utilities sector is resting on uptrend support.
In the past 10 years, "after you've reached a difficult level in the U.S. 10-year yield, you see the chart either back away or back and fill," said Worth, head of technical analysis at Cornerstone Macro. "And the reciprocal of that would imply that we get a bounce off our trend-line in utilities and get a 4 to 5 percent rally."
Aside from the relationship to yields, Worth noted how positively utilities have responded to previous selloffs. In fact, Worth noted that since 2009, "the S&P 500 utilities sector has experienced six distinct intermediate declines," from which it has staged a sharp rally. "It's all been quite symmetrical, so what we would play for is the countertrend move back," he said.