Clean Energy ETFs Powering to 52-Week Highs

As world leaders converged on the United Nations (UN) Climate Action Summit in New York on Monday to make pledges to curb global-warming emissions, many clean energy stocks traded up around their newly minted 52-week highs. The industry stands to continue growing after 66 countries at the event promised to have more ambitious climate goals and 30 swore to be carbon neutral by 2050, said Chilean President Sebastian Piñera Echeñique, who is hosting the next climate think tank later this year, per MarketWatch.

Furthermore, clean energy initiatives used by some states to encourage solar power adoption contribute to the sunny outlook. California has pushed the envelope even further, requiring all new homes built in 2020 onward to utilize solar power. The Golden State has a goal of sourcing half of its electricity needs from renewable sources by 2030.

Those who favor sustainable investing and want cost-effective exposure to the segment should run their eye over these three clean energy exchange-traded funds (ETFs). Below, we look at the specifics of each fund before turning to the charts to highlight possible trading opportunities.

Invesco WilderHill Clean Energy ETF (PBW)

Launched in 2005, the Invesco WilderHill Clean Energy ETF (PBW) seeks to track the performance of the WilderHill Clean Energy Index – a benchmark comprising U.S. companies engaged in the advancement of cleaner energy and conservation. As well as investing in industry pure plays such as wind, solar, and biofuels, the fund includes companies based on their perceived relevance to the renewable energy space. Top weightings in the ETF's portfolio of 38 holdings include Enphase Energy, Inc. (ENPH) at 3.96%, SolarEdge Technologies, Inc. (SEDG) at 3.72%, and Ballard Power Systems Inc. (BLDP) at 3.65%. Dollar volume above $800,000 most days and a reasonable 0.18% average spread provide ample trading liquidity. PBW controls net assets of $177.87 million, charges a competitive 0.70% management fee, and has returned 47.87% year to date (YTD) as of Sept. 24, 2019. Investors also receive a 1.28% dividend yield.

Since the 50-day simple moving average (SMA) crossed above the 200-day SMA in early March to generate a buy signal, the price has indeed continued trending higher. More recently, the fund has broken above an ascending triangle, which is a bullish continuation pattern. Previous resistance near the triangle's top trendline at $30.50 now becomes support and a suitable entry point for traders who wish to play the upside momentum. Look to book profits on a retest of the prominent January 2014 swing high just above $35 while keeping downside risk limited with a stop-loss order situated beneath the 50-day SMA.

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)

The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), with assets under management (AUM) of $111.37 million, aims to provide investment results that correspond to the NASDAQ Clean Edge Green Energy Index. QCLN holds companies engaged in the manufacturing, development, distribution, and installation of emerging clean-energy technologies like solar photovoltaics, biofuels, and advanced batteries. The fund's top three stock allocations – Tesla, Inc. (TSLA), Universal Display Corporation (OLED), and ON Semiconductor Corporation (ON) – carry a cumulative weighting of roughly 20%. QCLN turns over $400,000 in daily dollar volume and has one of the tightest average spreads in the segment at just 0.13%. As of Sept. 24, 2019, the ETF offers a 0.87% dividend yield, charges a management fee of 0.60%, and has powered up 27.78% on the year.

QCLN shares have formed a broad ascending triangle over the past five months, with Monday's close sitting less than 1% below the 52-week high. Breakout traders should consider entering the fund if price breaks above the pattern's top trendline at $22.50 on above-average volume. Those who open a long position should think about using a trailing stop to take profits. For instance, traders could place an initial stop order underneath the August swing low and raise it beneath each subsequent higher swing low. Alternatively, traders who favor tighter stops could exit when the price closes below a fast period moving average, such as the 10-day SMA.

iShares Global Clean Energy ETF (ICLN)

The iShares Global Clean Energy ETF (ICLN) has an objective to track the performance of the S&P Global Clean Energy Index. It invests its $331.52 million asset base in companies involved in the biofuels, ethanol, geothermal, hydroelectric, solar, and wind industries. The fund also holds stocks that develop technology and equipment used in the clean energy process. As well as providing exposure to U.S. companies in the space, the ETF notably includes clean energy firms from Hong Kong, New Zealand, and Brazil. Solar panel maker SolarEdge Technologies commands the fund's number one allocation, with a weighting of almost 8%. Longer-term holding costs sit among the lowest in this niche, with an expense ratio of 0.46%. ICLN has jumped 38.94% YTD as of Sept. 24, 2019.

The fund's share price has trended sharply higher over the first nine months of the year, with only several minor pullbacks to the 50-day SMA. Last week, the ETF broke out of a tight ascending triangle to print a new 52-week high at $11.40, which may lead to further buying over the intermediate term. Traders who enter at current levels should set a take-profit order near $15, where the price encounters significant overhead resistance from a horizontal line stretching back to the fund's inception at the height of the Great Recession in 2008. Cut losses if the fund drops beneath this month's low at $10.81, as this invalidates the momentum trade setup.