Over the past several months, active traders have been buying into sectors that are traditionally known for stability and income such as financials and utilities. However, based on the patterns discussed below, it appears as though active traders may want to consider buying into other segments such as cleantech because the well-defined ranges are laying out clear buy and sell levels. Based on the charts, it is clear that the bulls are currently in control of the momentum in the cleantech sector and that there is little reason to expect this theme to reverse any time soon.

Invesco Cleantech ETF (PZD)

The cleantech sector comprises companies that provide knowledge-based products or services that add economic value by reducing costs, raising productivity and performance, and reducing consumption of resources. By reducing the negative impacts on the environment and public heath, these companies face a favorable increase in demand by conscience and value-driven investors.

As you can see from the chart of the Invesco Cleantech ETF (PZD), an exchange-traded fund (ETF) often used as a benchmark for tracking the sector, the price is currently trading within a defined channel pattern. The dotted trendlines suggest that the sector is trading within a period of consolidation, and some traders may choose to remain on the sidelines until a clearer move the upside is present. However, with that said, other traders may want to note how the recent move toward the upper trendline has aligned with the uptick in the 200-day moving average. This subtle development suggests that the bulls are taking control of the long-term momentum.

Chart showing the share price performance of the Invesco Cleantech ETF (PZD)

Johnson Controls International plc (JCI)

One of the top holdings of PZD is Johnson Controls International plc (JCI), which has a market capitalization of approximately $35 billion and has 105,000 employees. Taking a look at the chart, you can see that the price is trading within a clearly defined ascending channel. It is interesting to note how active traders will often look for these patterns so that they can enter buy orders near the lower trendline and sell near the upper trendline.

The strong performance in 2019 could be used as a leading indicator by investors and suggest to them that the price of the PZD could be poised to break out above the upper range of its channel pattern. The strong channel also suggests that traders may want to focus their efforts on companies that are known for sustainability and protection of the environment because they could be set to outperform in the years ahead.

Chart showing the share price performance of Johnson Controls International plc (JCI)


Another top holding of the PZD ETF that will likely gain the attention of followers of technical analysis is ANSYS, Inc. (ANSS). As you can see below, the price of the stock is currently trading within an ascending range similar to the one shown above. The upward-sloping 200-day moving average will likely be used by traders as confirmation of the newly formed long-term uptrend, and most traders will likely remain bullish until the price drops below a major level of support such as the lower trendline.

Chart showing the share price performance of ANSYS, Inc. (ANSS)

The Bottom Line

While much of investor capital over the past several months has been flowing into relatively stable sectors such as utilities and financials, cleantech appears to be one of the outliers that looks poised to move higher. The defined trading ranges clearly lay out where traders will look to place their orders, and a breakout on the PZD ETF could be the catalyst needed to send prices across the sector much higher.

At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.