Global X’s CleanTech ETF Delivers Strong Yearly Gains Amid Pandemic Momentum

The Covid-19 pandemic has provided a tailwind for renewables as a potential shift away from fossil fuel. It seems inevitable now that both consumers and regulators have recognized the tremendous impact that lower emissions have had on pollution and other environmental health indicators.

Sustainability experts like Dr. Charles Donovan from London’s Imperial College Business School has highlighted that renewable energy sources are much more resilient to the monopolization trend seen in traditional energy. This will prompt regulators to favor renewables since world leaders have seen in the past few months how exposed the global economy is to oil demand shocks.

Moreover, the International Energy Agency predicts that renewable sources like wind, solar, and nuclear energy will grow by 50% over the next five years – a situation that will benefit stocks like those that comprise Global X’s CTEC ETF.

The ESG ETF market has also seen tremendous growth over the past decade to broadly defined market value of $45 trillion in 2020.

Along with that positive backdrop, the technical setups seen by the top constituents of this exchange-traded fund also seem lined up bullishly – reinforcing a positive outlook for the fund.

Global X’s CleanTech ETF top constituents – technical analysis

According to Global X’s official website, the ETF’s top holding is Enphase Energy Inc (ENPH) as of writing. Enphase Energy is a US-based company that specializes in the manufacturing of solar panels and inverters for both residential and commercial uses, with revenues growing from $62 million in 2010 to $624 million by the end of 2019.

Following Enphase – which accounts for 8% of the ETF’s total holdings – we find Plug Power Inc (PLUG) and SolarEdge Technologies (SEDG), both of which account for over 6% of the fund’s total assets under management.

Since these three holdings account for roughly 21% of the fund’s assets, we will analyze the technical setups of each of them to determine what direction the ETF might be taking over the course of the next few weeks or months.

Technical analysis on Global X CleanTech ETF (CTEC)

The Global X CleanTech ETF (CTEC) has been posting higher highs during intraday activity since the instrument was launched, although each of those sessions has been met with strong selling pressure.

If this trend continues over the next few months, it would be plausible to see the ETF surging to the $21 price level, which represents a 9.3% short-term upside. Meanwhile, at least two out of the three holdings analyzed here are exhibiting bullish signals that could end up pushing the ETF to those levels.

Enphase Energy Inc (ENPH)

Enphase stock price has been surging since its March lows, moving from $24 per share back, then to as high as $133 per share today.

The stock has gone parabolic amid increased volatility over the past few months and the trend remains significantly biased to the upside as the company’s sales continue to grow quarter by quarter.

Based on a Fibonacci projection derived from the current trend, we can see the stock surging to $156 in the short-term, although the parabolic setup could signify that there will be significant volatility ahead as the stock moves to new highs.

PlugPower Inc (PLUG)

PlugPower Inc is perhaps the laggard among the three holdings this article is covering, as the short-term outlook seems bearish amid a potential double top formation at the $29 level.

The intraday price action has already shown significant reluctance from market players to break above this level, while the RSI oscillator is showing a pronounced bearish divergence that could lead to a short-term reversal.

SolarEdge Technologies Inc (SEDG)

SolarEdge seems to be about to snap, as the latest consolidation in the stock price could end up in a big push in any direction.

The outlook for this one remains uncertain, but given the significant strength that the stock has seen lately and the positive backdrop that the entire industry is seeing, it would be hard to see the stock plunging below the lower trend line shown in the chart.

Meanwhile, the MACD oscillator has already sent a strong buy signal and, at this point, a move above the $300 should provide confirmation that another bull run could be coming – possibly aiming for fresh all-time highs.

SolarEdge Technologies Dives as Revenue Outlook Disappoints

SolarEdge Technologies, Inc. (SEDG) plunged 16.14% in extended-hours trading Monday after the solar inverter systems company worried investors with its sales results. The firm posted third quarter (Q3) revenues of $338.1 million, missing analysts’ expectations of $343 million. Moreover, the top line contracted 18% from a year earlier. Guidance for the current quarter also came up short of the mark. Management expects Q4 sales of between $345 million and $365 million, while analysts had expected the figure to come in at $391 million.

On the upside, the company disclosed an adjusted profit of $1.21 per share during the period, nearly double analysts’ forecast of 61 cents a share. CEO  Zivi Lando credited the result to growth in the firm’s European business.  “Our third-quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the pandemic,” he said in a statement accompanying the earnings release. Lando also noted that the company’s U.S. business is showing indications of a return to pre-pandemic levels.

Through Monday’s close, SolarEdge stock has a market capitalization of $13.42 billion and has surged over 180% year to date (YTD). In the past three months alone, the shares have gained 53%. Much of the upside may already be factored in, given the company currently trades at over twice its five-year average forward earnings multiple of around 18.

Wall Street View

Roth Capital’s Philip Shen raised the firm’s price target on SolarEdge to $300 from $191 while maintaining his ‘Buy’ rating. The analyst argues that strength in the U.S. residential market and ongoing European growth underpin the company but cautioned European Union (EU) shutdowns could provide potential challenges.

Sentiment among other research houses remains mixed. The stock receives 6 ‘Buy’ ratings, 1 ‘Overweight’ rating, 8 ‘Hold’ ratings, and 2 ‘Sell’ ratings. Price targets range wildly from as high as $378 to a Street low of $77. Today’s expected open at $224.50 implies a 6.9% premium to the Street’s 12-month median price target of $210.

Technical Outlook and Trading Tactics

After retracing to the 200-day simple moving average (SMA) during the March pandemic sell-off, the SolarEdge share price has trended sharply higher. Tuesday’s open looks set to test an area of August consolidation between $200 and 230. Falls below this level could see a test of the $180 level, where price finds a confluence of support from a horizontal trendline and the rising 200-day SMA. Active traders who buy in this area should consider using the all-time high (ATH) as a place a book profits.