After checking out your sample project, it seems like the stretching issue has nothing to do with Screen Alignment being set to PSA Velocity. As you can see in the screen shots below, changing this has no effect.
Instead, the bug seems to be connected to “UVFlipping Mode” under Rendering on the Required node of the emitter. If this is set to anything other than “None,” the particles can become stretched and distorted. As a workaround, I have discovered that if you change the Mirror Flags under Initial Size module 0 (X-Axis) from “different” to “same” it will fix the stretching even if UVFlipping Mode is enabled.
I have already logged the UVFlipping Mode bug as [JIRA UE-52507][5].
Our developers will be investigating the issue further. Please follow that link to monitor the status of the report.