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New Trend Signal for a Former High Flyer

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Today's commentary will start with price chart analysis for a clean energy ETF, which once led the market with triple digit gains. After a corrective period, it appears that this high flying ETF and a few of its brethren are turning up again with recent trend signals. We will start with the price chart analysis and then turn to the systematic signals.

The price chart below shows the Clean Edge Green Energy ETF (QCLN) surging over 400% with a monster advance from the March 2020 low to the February 2021 high. A 38% decline followed as the ETF retraced a little less than half of the prior advance with a falling wedge. Note that the pattern and the retracement amount are typical for corrections after a big advance. QCLN broke out of this wedge in June, consolidated into July-August and is on the verge of a consolidation breakout now. Another breakout would be bullish and argue for a challenge to the February highs.

Now let's look at a systematically driven approach with two trend-following indicators, StochClose (125,5) and the Trend Composite, both of which are part of the TIP Indicator Edge Plugin for StockCharts ACP (details here). StochClose triggered bullish in late May 2020 with a cross above 60 and bearish in early May 2021 with a cross below 40. Even though these signals missed the bottom and the top, they caught the middle of the trend and this was enough for a 130% gain. The Bottom window shows the Trend Composite with similar signals.

These trend indicators turned bearish in early May after the ETF had already fallen over 30% from its high. This is the nature of trend-following: signals lag. Testing and experience suggest that trend signals like these are successful around 40% of the time and the average gain is usually more than three times the average loss. At this point, QCLN has bullish trend signals and these will remain in force until countered with a bearish signal.

Note that several more ETFs triggered bullish for StochClose over the past week and many of these were the high flyers from March 2020 to February 2021. TrendInvestorPro.com tracks these signals for a core list of 128 ETFs. Looking for more trend-following signals and a systematic approach? Check out TrendInvestorPro.com (click here).

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Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist, TrendInvestorPro.com

Author, Define the Trend and Trade the Trend


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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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