Trading Idea closing - Renewable ETF
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The third-quarter earnings season in the US has picked up pace following the release of the latest figures from US banks. Based on preliminary expectations, the third quarter is likely to have closed with strong earnings growth for S&P 500 companies, led by the energy and technology sectors. The major US banks have still achieved solid growth on an annual basis, indicating that their operations remain strong, but the pace has clearly slowed in many cases, which has tended to result in negative share price reactions.
Commodities - Technical Analysis
Gold and silver continued their downward trend, bouncing off key levels. Until their downward trends are broken, they will not be able to produce a significant rise. The fall in oil prices reversed from the $87.5 level and began a slight upward movement. Natural gas remained in an uptrend; a significant rise could even occur if it breaks out upwards. The price of copper has become stuck in a wider range, so the oversold and overbought zones may offer more favourable trading opportunities. The falling prices of wheat and corn have reached key support levels; a buying reaction from these levels could present favourable long opportunities with limited risk.
Our trading idea related to the IQQH ETF, which tracks the renewable energy sector has performed well since we published it in early July. We continue to view the sector's long-term outlook as favorable, but given the broader market uncertainty seen in recent days, sharper corrections are possible in the short-term, so it may be worth closing positions for now and realizing the 17-18% profit achieved so far.
Fundamental picture
The IQQH ETF (iShares Global Clean Energy Transition UCITS ETF) includes a mix of renewable energy utilities and manufacturers involved in the sector's supply chain (e.g., solar panels, wind turbines, etc.). We consider the long-term outlook for both segments to be favorable, as global electricity consumption is likely to continue to grow rapidly in the coming years thanks to a number of major megatrends (e.g., electrification, data centers / AI, cooling and heating, etc.).
The renewable energy sector has performed particularly well in recent months, as the market had already priced in almost all the negatives in the period leading up to the Trump administration's legislative package passed in early July, leaving room for a rise. This was helped by several factors: the US Federal Reserve's interest rate cuts in September and October, and the regulatory uncertainty has also ended (the final version of the July legislative package was also milder than expected).
However, investor uncertainty surrounding the AI sector has intensified in recent weeks, dragging down broader market sentiment and the major stock indices as well. In addition, uncertainty surrounds the Fed's December interest rate cut (e.g., mixed labor market data and lack of data due to the government shutdown), which also complicates the situation for investors.
Although the ETF’s price has not yet reached our stop level, which was raised in October (up to EUR 7.7), we are closing our trading idea due to the aforementioned market uncertainty, and it may be worth realizing the profit of ~17-18% achieved so far.
Technical picture
The curve gave long closing signals because falling below 8.2 activated a reversal pattern. In the longer term, however, the long opportunity does not necessarily have to be abandoned. The 7-7.4 range is a strong support level, and if it returns here and remains above the trend line, the long-term outlook may remain positive. In the short-term, however, a correction may occur, so it may be worth exiting the position.
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