While technical indicators can provide an eponymous indication of where an asset might be heading, they’re never a be-all, end-all, but rather a tool of the trade.
That said, technical indicators in the Direxion Daily Global Clean Energy Bull 2x Shares (KLNE) could keep traders guessing at the moment. The 50-day and 200-day moving averages look to be heading on a collision course, which could result in strength or weakness moving forward.
It all circles back to the clean energy sector and where it might be heading. The trillion-dollar infrastructure package signed into law by President Biden has been providing tailwinds for clean energy as of late.
However, it’s been a rocky road to its recent recovery over the past year.
“Over the last year, the S&P Global Clean Energy Index* has underperformed the S&P 500 index* by over 13% (as of 11/18),” a Direxion Invesments “The Xchange” blog notes. “More recently, clean energy stocks have bounced back with the index up over 8% in the last month. The index sits at 2,038. This is 6% above its 50-day moving average* and 5% above its 200-day. At 1,922, the 50-day is 1% below the 200-day’s 1,937 as both averages sit close together.”
As mentioned, the 50- and 200-day moving averages will be telltale signs. Will the chart exhibit a “death cross” or a “golden cross?”
“The question traders should be asking is whether any convergence will be a golden cross* or a death cross*,” the blog explains. “A golden cross occurs when a short-term moving average crosses over a long-term moving average to the upside. The opposite is a death cross when a short-term moving average crosses over a long-term moving average to the downside. Traders consider a golden cross a bullish indicator, while a death is bearish.”
Doubling Up the Leverage on Clean Energy
Traders who err on the side of bullishness in clean energy can double up their gains with KLNE. The fund seeks to return 200% of its benchmark index, the S&P Global Clean Energy Index, in a single day.
The S&P Global Clean Energy Index gives exposure to developed market countries whose economic fortunes are in the global clean energy business. These include companies that are involved in the production of clean energy or provide clean energy technology and equipment.
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