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MARKET TIMING


Clean Edge U.S. Liquid Series ETF - This Thoroughbred Has Left The Gate

12/23/20 01:53:06 PM
by Matt Blackman

The clean technology economy is on fire.

Security:   QCLN
Position:   N/A

Year 2020 will go down as the most challenging for many of us. The same can't be said about stocks, especially those of the clean technology variety.

One stock that exemplifies the group from a performance perspective, up more than 300% since the March lows, is First Trust Nasdaq Clean Edge US Liquid Series ETF (QCLN). Although that performance pales in comparison to electric vehicle manufacturer Nio Inc, up more than 2400% year-to-date as of December 21, or electric truck maker Workhorse up more than 1585% over the same period, few traders would complain. Even sector star Tesla was up nearly 800% over the period.

As an ETF, QCLN spreads risk across a number of clean tech holdings, the top five of which are NIO, ENPH, TSLA, ALB and SEDG making up 32% of the portfolio. For more information on QCLN holdings see https://finance.yahoo.com/quote/QCLN/holdings/

Figure 1. Daily chart of the First Trust Nasdaq Clean Edge U.S. Liquid Series Index ETF (QCLN) show how it has taken off from the March 2020 lows and its long-term linear regression line (red) compared to the ALPS Clean Energy ETF ACES.
Graphic provided by: Freestockcharts.com.
 
Other noteworthy clean tech ETFs include Invesco Solar ETF (TAN) up 360%, APLS Clean Energy (ACES) up more than 200%, and ALPS Disruptive Technologies (DTEC) up more than 100% over the same period.

Like many stocks in the clean tech space, QCLN looked to be building a parabolic trajectory as 2020 drew to a close which makes buying it a huge challenge. Parabolic blowoffs can be quite destructive to portfolios when a correction finally arrives. Furthermore, the stock was trading for more than twice the long-term linear regression line price of $31.08, generally a measure of a stock's fair value.

Figure 2. Long term chart of QCLN showing how it has performed since 2008.
Graphic provided by: Freestockcharts.com.
 
Fundamentally, QCLN has 26.25 million shares outstanding with net assets of $1.51 billion, a price/earnings ratio of 45.17, average price to book of 8.36 with a dividend yield 0.25% according to data from the Wall Street Journal. As a point of comparison TSLA boasted a PE of 1300 in late December.

In the wake of the Biden-Harris victory, euphoria for anything clean or green hit new highs. The question remains as to how these stocks and the overall stock market will fare once the cold realities of 2021 begin to dawn. Those hoping for a severe correction to buy these stocks at a big discount will likely be disappointed as the recent hysteria demonstrates that commitment for the clean technology economy is rising, not falling.

Whenever possible, best to wait for a correction or consolidation at the very least and new buying signal before jumping in with both feet.

Suggested Reading

QCLN Nasdaq Overview



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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