Clean energy ETF on the move

Mike Zaccardi, CFA, CMT

As a technician, I like to see what stocks are moving. Uptrends, breakouts, bullish chart patterns are all tools in the toolbox. Utilities stocks, as measured by the XLU sector ETF, are doing a whole lot of nothing this year, so I must look elsewhere.

Look no further than the renewable energy space. Two of the common ETFs are the solar ETF (TAN) and the wind energy ETF (FAN). Both charts appear to be in uptrends with some bullish features. I want to go more broad, though – there’s an ETF for that.

Enter ICLN. ICLN is the iShares Trust Global Clean Energy ETF. ICLN is basically the world of clean energy, inclusive of solar and wind companies. For a little background on the fund, the clean energy ETF is up more than 20% this year while utility stocks have been stagnant. And let’s not even talk about what has been going on in the energy space – although energy did make dubious news recently for falling to the lowest sector weight in the S&P 500.

Back to ICLN – there are 29 stocks in the portfolio and offers investors a 1.3% yield.. not that the dividend yield matters to us CMTs 😊

Also something technical analysts don’t care about is the ESG score, but the environment is important, too. MSCI rates ICLN with an A rating for those of you looking to invest in environmentally-friendly funds. But what’s actually in the ETF?

The largest holding is SolarEdge Technologies (SEDG) with a 6.2% weight. It’s not a very concentrated portfolio. For perspective, NextEra is a 15% weight in XLU. Sunrun & First Solar are two more names you may have heard of within the iShares Clean Energy ETF. Vestas is a wind energy firm in the ETF.

The price of ICLN peaked earlier this year at $14, but then plummeted to $8 at the worst of the COVID crisis. What a comeback, though, as ICLN has climbed back above the early 2020 high.

Despite a doji candlestick reversal on July 24, the chart still shows a bull flag in the last week or two. Traders will want to monitor the chart for a breakout above the $15 level.

One last nugget – would you believe ICLN’s all-time high is near $60 way back in 2008, shortly after inception? This happens more than you may think – when an area is hot, like clean energy was in mid-2008, new ETFs come out to meet investors’ needs. Then what happens? Prices collapse, and those who bought early are left holding the bag. Such was the case for ICLN. There’s a long way to go back to those 2008 highs.

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Chart used with permission from TradingView.com