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.