Lithium prices have jumped by 60% in 2016. This piece of information is enough to scare investors away from Lithium/Lithium producers.
However, fundamentals and technicals (charts) of the Lithium market appear to have aligned perfectly for another great year.
Tesla to double global battery production
Oilprice.com reported earlier this month that Tesla Motors, American automaker and energy Storage Company, is planning to double its global battery production.
This is likely to result in an expansion in the electronic vehicle market and a massive bull run in Lithium. Some facts –
- According to the Financial Times, an electric vehicle uses 4,800 times the volume of lithium as a smart phone
- According to the morning star, Lithium demand could rise by 16% annually through 2025
- Meanwhile, mining Lithium is technically different, thus supply deficit is likely in 2017
Betting on the Lithium Bull Run via Global X Lithium ETF
The Global X Lithium ETF (LIT) invests in the full lithium cycle, from mining and refining the metal, through battery production.
Bullish weekly chart – Inverse head and shoulder
- Inverse head and shoulder is a bullish pattern…which means it is valid only if it appears at the bottom of the downtrend.
- In the above chart, the pattern has appeared at the bottom of the downtrend that began in early 2011.
- A bullish break above the neckline hurdle of $26.00 would confirm a major bottom is in place and thus could send prices higher to $28.84 (2014 high) and $30 levels.
FMC Corporation – Patience is the name of the game
- The daily chat shows a topping pattern
- The weekly RSI is overbought as well while the monthly chart shows a Doji candle (December).
- Hence, the stock ranks lower on Lithium play and traders need to wait for a convincing break above the recent high of $60 or bullish inverse head and shoulder break in Global X Lithium ETF.
Chemical & Mining Co. of Chile Inc. (SQM) – Bullish monthly chart
- Bullish price RSI divergence followed by a nice rally over the last one year coupled with the fact that the RSI is sloping upwards and quite far away from the overbought territory suggests any dips are likely to be bought into and the stock price could head higher to 2014 high of $36.25.
- The bullish monthly chart makes this a preferred Lithium play.
Albemarle Corporation (ALB) – Already at record highs
- The fact that the stock is already at record highs warrants caution on the part of the bulls.
- Once again, this could be a good Lithium play following a bullish inverse head and shoulder breakout in Global X Lithium ETF.
- Bullish invalidation is seen once the price breaks below the rising trend line support seen on the monthly chart above.
At the moment, the best way to bet on the Bull market in Lithium is via Global X Lithium ETF. Chemical & Mining Co. of Chile Inc. (SQM) can also be considered as another good option as well as far as technical set up is concerned.