Alt Energy Investments: Three Scenarios for Clean Energy

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"With oil prices rising again recently, it's sparked yet another conversation about. . .alternative energies"

When oil prices moved to over $30 a barrel in the mid 1980s, it was considered a significant event.

Flash forward to today, where we've seen crude oil prices double in just the past four months. Worldwide oil demand has soared and, though the global downturn has seen the pace of demand slow, when the global economy gets back on track, it should prove even more bullish for oil.

Rising Oil Prices Spark Interest in Alternative Energy

With oil prices rising again recently, it's sparked yet another conversation about the viability of certain alternative energies.

One ETF that tracks the performance of clean energy firms is the PowerShares WilderHill Clean Energy (NYSE: PBW)—a widely traded vehicle that gives you exposure to this still-growing sector in a safer way than investing in individual companies.

When it comes to the alternative energy market, wind power, solar, hydroelectric, geothermal and nuclear power have all received attention over the past couple of years.

Three Scenarios for the Clean Energy Fund

When the stock market bottomed out in March and oil prices retested their lows, PBW's Clean Energy Fund did the same.

Since then, however, PBW has doubled off those lows to the June 10 high of $11.37. This is right around the swing high of $11.40 that it tested back in November, before it pulled back to the trendline drawn off the March lows.

Also, the 50-day and 200-day moving averages are very close to crossing one another—a development that sometimes indicates a short-term top.

So what we have here is a relatively clear-cut conclusion. . .
  • A close above $11.40 would be bullish and should lead to higher prices.
  • However, a close below the trendline, currently around $10, would be bearish over the short-term.
  • A close or two below the 50-day and 200-day moving averages, which are currently around $9.50, could lead to a move down to $8 or lower.

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