3 Ways to Trade the Rise in Water Stocks

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3 Ways to Trade the Rise in Water Stocks

Water conservation and purification in households, companies, and industries is an investment issue that will become more important in the next decades. Many long-term traders search for underlying demand for such items when considering prospects for their portfolios. In this post, we will look at three charts that many active traders utilize to obtain exposure to water stocks, as well as how they will likely position themselves in the next weeks and months.

Key Takeaways

  • Because of the significant underlying demand for clean water, prices in this specialised subsector are rising.
  • Nearby support and resistance levels are providing clear guides for where active traders will look to place their buy and stop orders over the weeks ahead.

Invesco Global Water ETF (PIO)

When active traders wish to acquire exposure to specialist market niches, such as water conservation and purification throughout the world, many resort to exchange-traded funds, such as the Invesco Global Water ETF (PIO).Fundamentally, the fund is made up of 53 holdings from across the world that are working hard every day to ensure that everyone has access to clean water.

The recent pullback from the swing high of $33.28 has led the price toward a crucial level of support, as indicated by the horizontal trendline, as seen in the chart below. Active traders will most likely use the nearest support as a guideline for placing buy and stop orders. Buy orders may be put as close to the dotted trendline as feasible, while stop-loss orders may be set around, or below, the support of the 200-day moving average, which is now trading near $29.32.

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Pentair plc (PNR)

Many active traders interested in the water solutions subsector may want to take a closer look at Pentair plc, which is one of the top holdings of the PIO ETF (PNR).The chart below shows that the stock has been in a clearly defined uptrend since the 50-day moving average crossed above the 200-day moving average in July.

Each retest of the combination support provided by the dotted trendline and the 50-day moving average indicates that the bulls have regained control of the momentum. Bullish traders will most likely want to purchase as close to present levels as feasible, then guard against a selloff by setting stop-loss orders below $47 or $40, depending on risk tolerance and outlook.

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The demand for ventures that attempt to profit from the need for fresh, clean water has increased in recent years. If the trend continues – and all indications are that it will – investors can expect to see a slew of new investments that give exposure to this valuable commodity and the corporations who supply it to the market.

American Water Works Company, Inc. (AWK)

American Water Works Company, Inc. is another top holding of the PIO ETF that might attract traders’ attention in the coming weeks (AWK).The long-term moving averages and dotted trendlines in the chart below have offered unambiguous indications to traders on where to place orders.

The current advantageous risk/reward arrangement implies that the recent hint of strength might be an early harbinger of a longer-term move higher. Stop-loss orders will almost certainly be set below $140.36 or 134.27, depending on the outlook and risk tolerance.

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The Bottom Line

The natural desire for clean water offers a solid foundation for investment in firms specializing in conversation and purification. Based on the chart patterns highlighted above, it looks that profitable risk/reward setups on charts from throughout the sector may be providing traders with an attractive purchasing opportunity.

Casey Murphy did not hold any of the assets listed at the time of writing.

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