The First Trust Nasdaq Clean/Green Energy ETF (QCLN) posted a strong break above the midpoint of nine-month long
consolidation. The ETF has exposure to various industries related to clean energy, with the largest holdings including
Tesla, Nio, Xpeng, Albemarle, Enphase Energy, SolarEdge Technologies, Plug Power, On Semiconductor, and First Solar.
This is a great way to gain exposure to a variety of clean energy themes. See annotated chart
Author: Kenley Scott
Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.
Global Sector Commentary
Key points from this report:
- S&P 500 to all-time highs after eight weeks of consolidation.
- Equal-weighted S&P 500 (RSP) with some RS gains in October, showing better market breadth.
- We are still waiting on small-cap full participation (in addition to banks and energy). IWM testing highs of a wedging pattern, still in nine-month range.
- Breadth overall (0NY30) is still a bit muted although improving.
- Breakouts are back to above average for the past two weeks, including this week, but recent spikes have been less pronounced. Something to watch. Above ~250 would be potentially more meaningful.
- See the full report for a couple dozen recent breakouts with high EPS Rank that have reported earnings or do not report for at least three weeks.
O’Neil Energy/Material Weekly
NextEra Energy (NEE) – $151B market cap – Technicals: The stock broke above its 50-DMA on a bounce off its 200-WMA for a second time in three weeks in early October. While overall still within a 39-week consolidation, we suggest investors buy or add to positions on the retake of the 50-DMA and above the recent midpoint of $82.5. EPS Rank of 71 and SMR Rating of C are decent. A/D Rating of B- and Up/Down Volume Ratio of 1.5 are solid, while its RS Rating of 56 is moderate but improving.
Global Sector Commentary
Key points from this report:
- As inflation persists, watch commodities, cryptocurrencies, and software.
- Oil, copper, lithium, aluminum, zinc are all at decade or all-time highs this week. High energy costs and lower potential supply/production is a key theme.
- Cryptos are rising again. Bitcoin is above the midpoint of a base, next level all-time highs near $64,860.
- IGV solid performance, clearly helped by MSFT with pricing power but others with higher growth as disruptors with less inflationary concerns than other industries.
O’Neil Energy/Material Weekly
Matson Inc (MATX) – $3.8B market cap – Technicals: The stock recently broke out of a 27-week cup base on good volume. It
gapped up on after releasing a Q3 trading update. It has reversed lower over the past two days and is now testing 21-DMA
support. We would suggest waiting until it establishes support once again before It has fundamental profile with an EPS Rank of
95 and SMR Rating of A. This is attributable to strong expansion in pre-tax margin and ROE. Pre-tax margin improved to 11% as
of FY20 from 5% in FY19 and ROE expanded to 22% from 11% over the same period. Technical profile also looks solid with an
upward trending RS line and an RS Rating of 91. Up Down Volume of 1.3 and A/D Rating of B- indicate good net money flows.
Industry Group Rank improved to 7 from 27 over the past eight weeks showing good group support. Institutional sponsorship
increased ~40% y/y to 472 as of September. Company Description: Matson is a Hawaii-based holding company that provides
ocean transportation and logistics services to Hawaii, Alaska, Guam, and other countries in Micronesia. Q2 revenue by segment:
ocean transportation 78% and logistics 22%.
Global Sector Commentary
Key points from this report:
- Financial and Energy clear lead in global markets.
- Average developed market exposure to the two sectors is 32% (U.S. is 21%). Average emerging market exposure is 44%.
- Developed markets with highest combined exposure are Norway, Singapore, Canada, Israel, and Austria. Best setups are Canada/Norway.
- Emerging markets with highest combined exposure are Saudi Arabia, Hungary, Colombia, Russia, Qatar, and Poland. Indonesia among highest financials. Best setups in Russia, Qatar, and Indonesia.
O’Neil Energy/Material Weekly
Oil Search (OSH.AU; OSH:AU) – $7B market cap – Technicals: The stock is making the right-side of a stage-one 30-week consolidation. The pivot out of the base is at AUD 4.6. The stock has a high EPS Rank of 86 but a poor SMR Rating of E due to the 2020 impact of negative sales, margins, and ROE. Technical ratings are improving, including a RS Rating of 73 up from 39 four weeks ago, and an A/D Rating of B+ on four weeks of above average buying. Company Description: Oil Search is a Australia-Papua New Guinea (PNG) based oil and gas exploration and production company. Per H1, 70% of sales was from LNG and gas, 27% from oil and gas condensate, and 3% from others. It operates all of PNG’s producing oil fields and holds a 29% interest in the ExxonMobil (XOM)-operated PNG LNG project. In 2018, Oil Search acquired oil leases on the Alaskan North Slope, a well-established oil province. Fundamentals: In H1, led by rise in oil prices despite a drop in production (-8% y/y), revenue rose 7% y/y to AUD 668M (missed consensus by 3%). Volumes were down led by planned five-week maintenance at the PNG LNG project. EBITDAX rose to AUD 489M, (beat) and adjusted EPS increased to $0.067 (beat by 34%).
Global Sector Commentary
Key points from this report:
- Global Index (VT) >5% off highs for first time since February-March and below the 100-DMA once again after a brief retake.
- Breakout totals are weak globally but are not at concerning levels (February 2020, Q4 2018, Q2 2015).
- Unlike prior consolidations in February-March and May, there seems to be a larger number of breakdowns amongst leadership, especially in the U.S. and Europe.
- See the full note for a list of weakening long-term leaders.
- Taking over leadership, at least in the short term:
- U.S. regional banks, oil & gas producers, and leisure services.
- International markets with strong Financial/Energy sector weightings include Norway, Russia, Qatar, Saudi Arabia, India, and Hungary.
- See the full note for ideas from the above areas that are recently breaking out or setting up.
O’Neil Energy/Material Weekly
WTI crude oil prices are testing the $75-77 range again. This is resistance from the 2018 peak which it initially tested in
July before a sharp August pullback. It has now been mostly range-bound between $65-75 for the past four months. A
break above $75-77 leaves the next resistance above $90 (created from breakdown from late-2014).
Global Sector Commentary
Key points from this report:
- Very strong absolute/relative performance from several leisure-related areas this week.
- Airlines, travel booking, hotel operators, casino operators, and other leisure services all rose sharply.
- Other re-opening areas like Financial also had strong late-week recoveries to close positive, but leisure/travel more of the standout.
- Best positioned ETFs include Online Gaming (BETZ) and Dynamic Travel/Entertainment (PEJ). Airlines (JETS) and Travel Tech (AWAY) still have more overhead.
- In terms of O’Neil Industry Groups, Leisure-Lodging and Leisure-Services, up 5-6% this week, have none and minimal overhead, respectively.
