Trading Idea closing - Renewable ETF
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Our Equity Top Pick List
We have updated our Equity Top Pick List to reflect the events of the past quarter. The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. It can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. Technical analysis should be used to time / determine the specific investment decision.
Could the momentum return in the semiconductors?
The semiconductor sector has had a challenging quarter, with its performance in recent months lagging behind improvements in underlying fundamentals, even as AI-driven demand remained exceptionally strong. The accelerating adoption of AI by enterprises and the proliferation of AI agents are significantly increasing the demand for computing capacity, which points to a further surge in cloud services and data center investments. Given current supply constraints, record-high backlogs, and higher-than-expected investment needs, we expect further upward revisions to earnings forecasts in the semiconductor industry. Nevertheless, the sector’s valuation appears favorable from a historical perspective, which, in our view, could result in a more attractive risk-return profile in the coming months.
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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