Looking at Invesco’s ETF funds so far in 2021, energy is a theme common to its top three performers. One fund, the Invesco DWA Energy Momentum ETF (PXI), feeds off momentum in the energy sector.
PXI seeks to track the investment results of the Dorsey Wright® Energy Technical Leaders Index. The underlying index is composed of at least 30 securities of companies in the energy sector that have powerful relative strength or ‘momentum’ characteristics.
PXI is part of the suite of Intellidex products from PowerShares, which means that the fund is linked to an index designed to outperform traditional cap-weighted benchmarks. Those who believe this methodology has the potential to generate excess returns may find PXI to be the ideal way to access the U.S. energy market in companies that are exhibiting strong momentum.
Momentum is certainly on the side of energy as oil prices recover from a forgettable 2020. The technical characteristics of PXI are showing strong momentum as well.
Using the relative strength index (RSI) indicator, PXI is heading up toward overbought territory, so momentum is high. On December 11, 2020, the ‘golden cross’ became apparent as the 50-day moving averaged crossed up the 200-day moving average, revealing an uptrend that’s sustained itself through the new year thus far.
PXI Powered by Clean Energy
Looking at PXI’s top holdings, two of the top five operate in the clean energy space, which is only seeing more strength under newly installed U.S. President Joe Biden. Biden’s push for clean energy initiatives is expected to grow the clean energy sector even more during his administration.
Those two companies include Clean Energy Fuels Corp, which is the largest holding at a 5.63% allocation of net assets. The other is Renewable Energy Group, at 4.68% of assets.
This dynamic duo is benefiting from the clean energy push. Clean Energy Fuels is up over 400% the past year, while Renewable Energy Group has grown by 250%. By adding clean energy companies to its holdings, PXI is able to capture growth in this arena.
PXI can still capture upside in recovering oil prices. Traditional oil and gas companies in its top holdings include SM Energy Company, Matador Resources, and Cheniere Energy. Oil prices are already off to a good start in 2021.
“The price of oil extends the advance from the monthly low ($51.64) as US crude inventories contract for the second consecutive week, and key market themes may keep oil prices afloat as global production remains subdued,” a Daily FX report noted.
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