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Top Eco-Friendly Stocks

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We are living in a world that is rapidly changing. Being conscious of how we interact with the environment is not a choice but a necessity now. People are becoming increasingly aware of the implication of their actions on nature and looking for ways to protect it. This has led to a huge shift in our habits, for example – the use of eco-friendly goods, looking for environment-friendly alternatives, and more. People realize that to promote mindfulness, they need to support companies that do not harm the environment. Therefore, more and more investors are deciding to support environmentally aware companies. They wish to further their cause, which will ultimately benefit everyone, by investing in their stocks,  

Companies across the board have understood that tomorrow will be too late as we are already facing the flashes of climate change. Progress cannot be at the planet’s cost, which is why companies throughout the globe are turning a greener leaf. If you wish to support their efforts and build a livable future for your loved ones and yourself, keep reading.

What Are Green Stocks and Why You Should Invest in Them?

Green stocks belong to the companies whose policies and activities are targeted towards benefiting the environment. These stocks are likely to focus on activities concentrated in pollution control, recycling, alternative energy, carbon abatement, and more. 

These stocks are also called eco-friendly stocks, and they align with the interest of investors who believe in sustainable development. While there is a raising need for environment-friendly companies, their growth often does not spurt as they rely primarily on government subsidies and incentives. As the government’s support depends mostly on the country’s economic condition, there is no surety of stability. 

There is a greater need for investment in greener stocks. This will allow these companies to expand. We have shortlisted the top eco-friendly stocks that you can invest in.

1. Enphase Energy Inc. (ENPH)

ENPH is a California-based company that produces solar micro-inverters. This green energy company produces energy-efficient inverters for both commercial and residential properties. The company has installed over 940,000 micro inverters worldwide, curbing billions of pounds of carbon dioxide. Its product has generated over four billion KW of energy without adding to the carbon level in the environment.

ENPH has been presented with several awards and accolades for its contribution towards promoting clean sources of energy. It includes the prestigious Solar Innovation Award that was presented to them in 2018 by Solar Solutions. The company has had the honor of being mentioned in many lists for its innovation. Enphase is a rapidly growing company that has shown only upward revisions. 

It was named one of the Grids Edge Top 20 Most Innovative Companies in 2015 and made the Green Builder Hot 50 Products list in 2018. The company is growing, and earnings estimates have only received upward revisions, with expected earnings growth of 420% for the fiscal year of 2019. Investing in this company will be a smart move for your financial targets and the planet as well.

2. Weyerhaeuser (WY)

Weyerhaeuser is a trust for timber real estate investment. It is almost unacceptable to see a company on this list whose primary activity is to chop trees to procure construction lumber. What we need to understand here is that sustainable development does not mean abstinence from using natural resources. It means doing it judicially. This company believes in sustainable forestry. Weyerhaeuser has planted over a billion trees within a tenure of 10 years. It is committed to clean energy and responsible development.

It is also known to be transparent towards its stakeholders and promotes inclusion in the workforce. Weyerhaeuser was featured on the Ethisphere list as one of the most ethical companies globally and on other lists. The price to earnings ratio offered by the company is 28.28, and its dividend yields  4.57%.

3. Clean Harbors (CLH)

Clean Harbors is one company that takes social responsibilities very seriously. In addition to being ethical while performing its core operations, CLH is also known to clean up the mess created by other organizations. Complete hazardous waste management and emergency spill response are two of its main services. 

CLH took the responsibility of heading the clean-up effort to deal with the oil spill in 2010 in the Gulf of Mexico and the mess created after the Deepwater Horizon explosion. 

CLH was founded in 10980. It is a Massachusetts-based organization that operates throughout the states, Canada, Puerto Rico, and Mexico. Safety-Kleen is its subsidiary that is deemed as the largest recycler and re-refiner of used oil. It aims towards sustainable growth, and its programs revolve around health and safety, energy usage, and customer solutions. The revenue of this company has only tripled in the last.

4. Brookfield Renewable Partners (BEP)

BEP focuses on renewable, green, and clean energy resources. Every ounce of energy produced by this company comes from a clean source. 75% of the energy is generated using hydroelectric dams, 20% energy comes from wind power, and the remaining 5% is generated using solar power.

BEP invests in renewable energy across the globe. It owns 940 facilities for power generation, including hydroelectric facilities, worldwide. Brookfield goes the extra mile when it comes to taking social responsibility. It has many philanthropy projects running under its name. The company focuses on its employees’ well-being, ethical governance, and maintaining transparency across the board. BEP{ has a long-term growth plan. The plan is to build and buy more wind and solar farms to produce cleaner energy. Its growth has been consistent.

5. Bloom Energy (BE)

Bloom Energy is a San Jose-based firm that focuses on renewable energy. They offer sustainable and clean electricity to commercial organizations across the globe. Its product is Bloom Energy Servers, which are power generators. These generators run on fuel derived from biological sources like methane. Methane gas is a by-product of decomposed biowaste like vegetables. BE recycles this gas and converts it into an energy source that can be used in the industries. By using this energy, industries worldwide can reduce the overall carbon footprint.

Along with reducing carbon emission, there is less consumption of water as well. BE’s technology has considerably brought down air and water pollution.

The company was expected to have an earnings growth of 250% in the year 20202.

Advantages of Investing in Green Stocks

Investing in eco-friendly stocks is ideal in many ways. If you are not convinced yet, the following advantages will make you consider it:

1. Contribution to Eco-friendly Projects

Green stocks belong to the companies that aim towards directing a part of their capital towards renewable and clean energy, natural habitat restoration, and more. If you are an investor who is aware of the ongoing climate change and interacts with the environment that it doesn’t cause any harm, you should invest in green stocks.

2. Tax Exemption

In addition to the fact that your investment will create a positive impact, you will be happy to know that any income derived from green stocks is exempted from taxes. The government wants more people to invest in green stocks.

3. Low Borrowing Cost

The higher the demand, the lower the borrowing costs. When the borrowing cost is low, the company incurs less expenditure, and it can maximize profits. This increased income is ultimately shared with the investors as dividends, bonds, or ETFs exchange-traded funds.

Trading Sustainable Stocks

Most green stocks, including the ones we have mentioned above, are available online. You can trade them by opening an account with a broker. Look for a broker that offers individual stocks. You can even look for eco-friendly ETFs.

Frequently Asked Questions

Q1. Which stocks can be called green stocks?

Green chip stocks are the ones that belong to companies that work towards the betterment of the environment. Mostly stocks that belong to companies focusing on alternative energy sources, carbon abatement, recycling, and pollution control.

Q2. Are green chip stocks legal?

Yes, green chip stocks are legal.

Q3. Are green chip stocks profitable?

Green stocks are not like your conventional stocks. It can be difficult to make a profit, but with the right stocks, it is possible. Do your research before investing money. In addition to financial gains, the real gain is the sense of fulfilling your ethical duty towards the environment.

Q4. What are some of the top eco-friendly stocks available in the market?

There are many, and we have explained the most popular and profitable ones above.

Bullish Key Reversal and Bearish Key Reversal

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What is Key Reversal?

A key reversal or reversal day and a one-day reversal is a simple pattern recognition tool that helps traders identify possible trend reversals. Traders can use this information and capitalize on possible market conditions.

Key reversal day is the day candle when main trend reversal.

Please, you can download the free key reversal indicator: Download key reversal indicator.

key reversal indicator screenshot

What is bullish key reversal?

Bullish Key Reversal day represents a daily candle on the chart from which the declining trend stops and the rising trend occurs on the chart.

Reversal day is presented with the black box below:

bullish key reversal

 

What is bearish key reversal?

Bearish Key Reversal day represents a daily candle on the chart from which the bullish trend stops and the bearish trend occurs on the chart.

Reversal day is presented with the black box below:

bearish key reversal example

 

Why is a Key Reversal Important?

Traders do technical analysis using various indicators, and a key reversal is an important part of it. It allows traders to predict how a current trend will move. Traders can you this knowledge to find profitable entry and exit points. Traders, however, need to keep in mind that key reversals should not be used in solitary. Use them in conjunction with other indicators like the Moving Averages.

Working of Key Reversals

The occurrence of a key reversal is not very common. It depends predominantly on the type of stock that you are trading. Key reversals might not take place all the time, but you can rely on them when they do. This is when a key reversal day occurs:

When there is an uptrend: an asset’s prices reach a new high before closing near the last day’s lows.

When there is a downtrend: an asset’s prices reach a new low before closing near the last day’s highs.

Keep in mind that these key reversals are more reliable when there has been a strong trend. This is what you should look for when a trend has ended:

When an uptrend has ended:

  • The Open has to be above the previous day’s close.
  • There has to a new high for the new day.
  • The Close has to be below the previous day’s low.

When a downtrend has ended:

  • The Open has to be below the previous day’s close.
  • There has to a new low for the new day.
  • The Close has to be above the previous day’s high.

Understand the Key Reversal Bar

A key reversal can be used to identify both bullish and bearish signals. 

A bullish ley reversal can be identified when the bar opens below the last day’s low but closes above it, and a bearish can be identified when the bar opens above the last day’s high but closes below it.

If you are use signals for trading, you should wait for confirmation. Open a position above the bar of a bullish key reversal. If you are doubtful, let the price close above the bar before buying. Sell or close a position below the bar of a bearish key reversal. To be sure, you can allow the price to close below the bar before you sell.

Related Terms

  • Reversal Day: A change in trend is highlighted by reversal days. More than their occurrences, traders must focus on their potency.
  • Closing Price Reversal: This is a powerful indicator that helps in the identification of trend reversals. If large spikes follow a strong advance, this indicator becomes more important.
  • Hook Reversal: It is a candlestick pattern that does not last for a long time and tells traders about possible reversals.
  • Island Reversal: Island reversals help the traders to see the gaps between different signal days. It is a powerful reversal signal.
  • Open-Close Reversal: This indicator can help you speculate a trend reversal after a strong trend.
  • Pivot Point Reversal: This indicator is easy to understand, and this makes it one of the most popular and widely used reversal patterns.

What is Candle Tail?

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Candlestick chart patterns developed in Japan and found their way to the Western trading market. These are indicators that are used by traders for technical analysis. Their formation allows traders to keep an eye on the price movement of assets, derivatives, securities, and currencies. These chart patterns include various candles in different colors and shapes. Every candle has two components: a body and one or two wicks. A candle wick is also known as a shadow. It is essential to understand how wicks behave to use this indicator accurately.

What is a Candle Tail?
candle tail or candle wick or candle tail
A candle tail or candle shadow, or candle wick, is an upper or lower line that can be seen protruding from the candle body. It defines the fluctuation period related to the opening and closing prices of an asset. In simple words, these shadows (tail, wick) tell us about the lowest and the highest prices at which trades have been performed for a specific security over a defined period of time. 

Candlestick chart patterns are formed with a set of data that includes closing price, opening price, and high-low values. Cumulatively, this data create a candlestick. 

The body of the candlestick can either be a filled or hollowed portion. There are lines on either side of the body that can be called wicks, but it is generally the one on the upper end known as the wick. The one at the bottom is called a candle tail. Whether you call both the lines wick or one tail, both are together known as shadows of the candle.

Learning Candlestick Basics

All the information presented in a candlestick chart is engrained in the body and the shadows. In a data set, the high value is represented by the upper candle tail, and the low value is highlighted by the lower shadow or the candle tail.

You will see a hollow candlestick when the closing price of a security is higher than its opening price. When this happens, the candle tail becomes representative of the security’s opening price, and the candle wick shows the closing price of the same security.

Similarly, you will get filled candles when the sling price is lower than the opening price. The shadows represent the opposite information in this case, with the wick showing the opening price while the tail shows the closing price.

More About the Candle Tail

The shadows show the high and the low values for a specific time period, but there is more than you can learn from them. 

These shadows tell analysts and traders about a security’s overall performance during a specific period of time. It allows them to formulate better strategies. When there is a short shadow, it shows that the most active time for that particular security was between the closing and the opening prices. If the shadow is longer, you can assume that the security was traded well before the opening and past the closing prices for a period of time. 

The two shadows are seldom equal, and it is important to see which one is longer and which one is shorter. When the candlestick wick is longer than the tail, it shows that buyers took strong actions during the trading session. This long wick is created by a weak low and a strong high.

When the tail is longer than the wick, it shows that sellers were in control of the market during a particular trading session and could bring the prices down to their preference before the buyers pushed the prices successfully up. It signifies a strong close of a session.

Whether at the top or the bottom, the formation of one long shadow majorly happens after a trend has ended and before the price action has reversed, making way for a new trend that will move in the opposite direction.

Spinning Tops

Spinning tops are not very common. They occur when the wick and the tail are of the same size. In this pattern, the body is usually small, making the candlestick look like a spinning top. One shadow is longer than the other; we can check who controls the trading session, traders, or buyers. However, when a spinning top occurs, it shows that the market is going through a period of indecisiveness. 

A small body shows that the price movement has been slow throughout the session, and the equally long wick and tail show that both bulls and bears were active during a particular time frame. The result for this time period is either standoff or stalemate.

Conclusion

  • A candlestick consists of a candle body and two shadows on either side of it. The upper shadow is called the wick, and the lower one is called the tail.
  • The wick’s top part shows the highest part, and the tail’s low part shows the lowest value during a trading session. 
  • Typically, the shadows’ length differs, which can be used to see whether the buyers or the sellers dominate the market.
  • When the lengths of both the shadows are the same, it is known as a spinning top.

Pivot Point Reversal Strategy

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A pivot point is one of the many technical indicators used by traders. It tells us about the overall trend of the market over various time windows. At the core, the pivot point is the average that includes closing prices of the previous day and the market’s highs and lows. The next day, if you are trading higher than the pivot point, it is seen as an ongoing bullish sentiment. If you are trading below it, the market has bearish sentiment.

Typical pivot point strategy is based on the pivot point levels, analyzing previous day support and resistance. Traders need to analyze movement through these levels to speculate the trend and its direction.

In certain situations, complex pivot points may also occur. It usually happens when the pivot point formation takes several days.

Pivot Point Reversal Strategy

Pivot point reversal strategy is based on the first support level’s price action during the bullish trend and the first resistance level during the bearish trend. Traders follow the main trend and enter into the trade after reversal analyzing pivot point levels.

Pivot point reversal strategy steps are:

  1. Determine pivot point levels
  2. Determine the main trend
  3. Pivot Point Reversal Strategy Trade execution
  4. Calculate stop loss and target.

The pivot point focuses more on the closing price, associated with the bar that shows either the highest high or the lowest low. This is how the indicator behaves in the following situations:

When an uptrend has ended:

  • The close lies below that day’s Low with the highest High.

When a downtrend has ended:

  • The close lies above that day’s High with the lowest Low.

Determine the pivot point level

The standard Pivot point levels formula is:

Pivot point price level (PP) = (High + Low + Close) / 3

First resistance price level (R1) = (2 x PP) – Low

First support price level (S1) = (2 x PP) – High

Second resistance price level (R2) = PP + (High – Low)

Second support price level (S2) = PP – (High – Low)

Third resistance price level (R3) = High + 2(PP – Low)

Third support price level (S3) = Low – 2(High – PP)

Determine the main trend

The main trend can be determined using trendlines on the chart or SMA50, SMA100, or SMA200 moving average. A trader can decide how they will determine the main trend.

Pivot Point Reversal Strategy Trade execution

If the trend is bullish, traders wait for the price to touch the S1 level and bounce upside to enter into BUY trade.
If the trend is bearish, traders wait for the price to touch the R1 level and to bounce the downside to enter into SELL trade.

See an example of how to enter into BUY trade using Pivot Point Reversal Strategy Trade:
Pivot Point Reversal Strategy Trade

For BUY trade, the S2 support level and the target is R1 level.

For SELL trade, R2 is the support level, and the target is the S1 level.

Conclusion

Pivot point reversal is used widely by traders across the globe. Keep in mind that the signals produced by it are the most reliable after a trend has ended. Weak trends lead to weak signals. If you are not sure about this indicator, use it in conjunction with other indicators.

Directional Movement System

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Developed by Welles Wilder, the Direction Movement System is a technical indicator that is rather complex to understand. You can read more about it in the author’s book. Despite being a difficult indicator to understand, it is deemed superior to the rest as it can overcome the one basic problem that is persistent with other indicators. Most indicators can work well in either a trending market or a ranging market. Such is not the case with the Direction Movement System. This indicator can identify the type of market and then provides signals that traders can use for trading.

What is Direction Movement System?

Direction Movement System represents an indicator that measures price move outside the N period of the trading range. Direction Movement System consists of three lines: The Average Directional Movement Index (ADX) that indicates whether the market is trending or ranging; the Positive Direction Indicator (+DI) measures upward trend movement; The Negative Direction Indicator (-DI) measures downward trend movement.

The Average Directional Movement ADX

This system has three lines that collectively consider the ability of bears and bulls in moving prices beyond the last trading day’s trading range. Let’s read about these three lines:

  • The first one is the Positive Direction Indicator, denoted as (+DI). It gives details about the movement related to an upward trend.
  • The second one is the Negative Direction Indicator, denoted as (-DI). It gives details about the movement related to downward trends.
  • The third one is the Average Direction Movement Index, denoted as (ADX). It helps you to assess whether the market is ranging or trending.

Directional Movement System and Trading Signals

This system has made way for the development of various trading systems. Dr. Alexander Elder presented many such systems in his book ‘Trading for a Living.’ Some of these systems are explained below:

Case 1: Go long when:

  • The Positive Directional Indicator is above the Negative Directional indicator.
  • The Average Direction Movement Index rises while (+DI) and ADX lay above (-DI).
  • The Average Direction Movement Index rises from below the other two lines.
  • Exit this position; the Positive Directional Indicator crosses below the Negative Directional indicator.

Case 2: Go Short when:

  • The Negative Directional Indicator is above the Positive Directional indicator.
  • The Average Direction Movement Index rises while (-DI) and ADX lay above (+DI).
  • The Average Direction Movement Index rises from below the other two lines.
  • Exit this position; the Negative Directional Indicator crosses below the Positive Directional indicator.

The Average Directional Movement System (ADX)

The declining ADX is indicative of a market that is losing its direction. When the ADX line falls below the other two lines, it shows that the market has become lifeless. Trading using the Directional Movement System should be avoided till the ADX has turned off bottom clearly. According to DR. Elder, traders should wait until the ADX line rises at least 4 steps off the low. For example, ADX rises to 20 from a low of 16. The longer the ADX remains below the other two lines, the stronger the trend will be.

When the ADX moves above -DI and +Di, it shows that market has become overheated. It would help if you took a profit in this case when the ADX starts turning downward again.

How to Set-Up the Directional Movement System

Welles Wilder’s Directional Movement System is not based on your standard moving averages (MA) formula. This indicator’s default setting also uses a 14-day smoothing, but it is very different from the 14-day Exponential Moving Averages. The standard EMA converts the time period into a fraction. A formula is used for this conversion; however, the Directional Movement System does not use that same formula. We have explained the formula below. 

You can go to the indicator panel available on your dashboard and change the default settings.

The Formula for Directional Movement System

Welles Wilder created several indicators, including the RSI and the ATR. While other indicators have similar formulae, the Directional Movement System is different and runs on a different formula. This is how it is calculated:

  • First and foremost, you are required to calculate the present day’s Directional movement. If the DM (Directional Movement) is positive, that is, today’s high is more than yesterday’s high, we will say the price is moving upward. If the DM is negative, that is, today’s high is less than yesterday’s high, we will say the price is moving downwards. A positive and negative DM cannot occur together on the same day.
  • The next step is to calculate the true range.
  • Now, you need to calculate the indicators. You need to divide the directional indicators’ positive and negative values by the True Range for your chosen time period.
  • Finally, calculate the individual components of the ADX. Start by calculating the Directional Indicator difference. Let’s assume that your chosen time period is 14 days, then take the difference between the positive and the negative DIs of that period. Count it as a positive number. Now, divide this number with the sum of the above two DIs to obtain the Directional Index.

Things to Keep in Mind

The Directional Movement System does not use the standard formula for calculating exponential moving averages. Therefore, you need to be cautious while setting your time period. Start with using shorter time periods.

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