With only a few weeks remaining in 2020, many active traders are starting to consider how they will best position their portfolios to profit in 2021. Understandably, many are looking to sectors such as health care and technology. However, one sector that may not be getting much attention but is worthy of a closer look is global infrastructure. In this article, we will take a closer look at the charts of global infrastructure companies and try to determine how traders will position themselves over the weeks and months ahead.

Key Takeaways

  • Bullish crossovers between 50-day and 200-day moving averages suggest that global infrastructure assets could be the early stages of a long-term uptrend.
  • Global infrastructure stocks appear to be trading near major levels of support, which will likely be used for determining the placement of stop-loss orders.

iShares Global Infrastructure Index ETF (IGF)

Active traders who are interested in gaining exposure companies that provide transportation, communication, water, and electricity services often turn to exchange-traded products such as the iShares Global Infrastructure Index ETF (IGF). Looking at the chart below, you will notice that the price of the fund has been training within a consolidation pattern since recovering from the March lows.

Active traders will likely want to note the break beyond the upper trendline in early November and how it coincided with the crossover between the 50-day and 200-day moving averages (shown by the blue circle). The moving average crossover is a common long-term buy signal and is often used by traders to mark the beginning of a long-term uptrend. From a risk-management perspective, buy orders will likely be placed as close to the dotted trendline as possible, while stop-loss orders will likely be placed below $38.85 in case of a sudden shift in market sentiment or underlying fundamentals.

Chart showing the share price performance of the iShares Global Infrastructure Index ETF (IGF)
StockCharts.com

NextEra Energy, Inc. (NEE)

As one of the top holdings of the IGF ETF, NextEra Energy (NEE) could capture the attention of active traders over the weeks ahead. Looking at the chart below, you can see that the price has been trading within a clearly defined uptrend.

Traders will most likely look to use the dotted trendline as a guide for determining the placement of buy orders. In a channel pattern, most traders will seek to buy near the lower trendline and then sell when the price approaches the upper trendline. To protect against a sudden selloff, stop-loss orders will most likely be placed below the 200-day moving average, which is currently trading at $65.66.

Chart showing the share price performance of NextEra Energy, Inc. (NEE)
StockCharts.com

The Infrastructure asset class tends to be less volatile than equities over the long term and provides a higher yield. As a result, some companies and individuals like to invest in infrastructure funds for their defensive characteristics.

The Southern Company (SO)

Another holding of the IGF ETF that could capture the attention of traders in coming weeks is The Southern Company (SO). Looking at the chart below, you will notice how the horizontal trendline has had a strong influence on the price over the past several months.

The recent retracement and new-found support near $59.27 is a sign that the bulls are in control of the momentum. Traders will also want to take note of the bullish crossover between the long-term moving averages because the popular buy signal suggests that the stock is in the early stages of a long-term uptrend.

Chart showing the share price performance of The Southern Company (SO)
StockCharts.com 

The Bottom Line

 As active traders start to assess their asset allocation and plan for the year ahead, much attention is being given the top-performing sectors such as technology and health care. However, based on the charts discussed above, it appears as though now could be an ideal time to consider increasing exposure to global infrastructure assets.

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