Technicals | May 23 2019
Bottom Line 22/05/19
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 25.72 / 22.81
Resistance Levels: 27.55 / 29.62 / 30.56
Technical Discussion
The Global X Lithium & Battery Tech ETF (LIT) is a comprehensive and well rounded ETF that invests in the total lithium cycle. Right from the beginning of the supply chain at the mining level, through to refining and battery production. It commenced trading in July 2010 and its primary exchange is the NYSE Arca. The advantages of this ETF is that it provides access to a broad basket of companies aligned to the Lithium sector. Lithium is commonly known for its use in lithium batteries yet it is also in high demand in relation to manufacturing heat resistant glass and ceramics. Yet it's the projected widespread adoption of lithium batteries in emerging technologies that has most investors interested at the moment. Top producers globally include Australia, South America (Chile & Argentina in particular) and also China.
Reasons to be cautious (watching for potential recovery)
→ A key resource required in the emerging technology sector
→ Limited producers globally yet growing
→ Europe and China seen as major consumers moving forward
→ January 2018 high readjusted to being a higher degree Wave-(1) high
'In Elliott Wave speak, Wave-(2)'s typically retrace into the 50.0% – 61.8% pullback area which in this case aligns 27.92 and 24.79 respectively. Thus far price has tagged a low of 25.72 so it was no real surprise to see buyers start to have a nibble again when this price zone was entered into.' Well since our last review the upside move that was trying to establish has failed miserably with price quickly heading back down towards major support at 25.72. In fact it has traveled slightly lower to 25.20 via a gap lower move two sessions ago. It's not a great look and it's really important now for major support to hold otherwise price action will head into full blown bearish mode. Last night we saw that gap filled with price closing towards the sessions highs rather than rejecting.
So this is a positive although it is only very early days. What we now need to see for things to remain positive is some upside follow through, and ideally on some increasing volume. If this can take place over the coming weeks then the potential for a bullish double bottom will come into play which will officially trigger above 30.56. Basis all this and the fact that price is significantly oversold on both the daily and weekly charts, then if a recovery is to start taking shape, then right here is where it needs to start from. It's time for price action to start leading way !
Trading Strategy
'A swing above 30.56 that sticks will take price back above the 200 day moving average which it hasn't been able to achieve for over 12 months. So it might be worth starting to put some of those beaten down ASX Lithium stocks onto your watch lists over the coming weeks and months if such a move can be achieved.' This from our last review yet with 30.56 still unable to be broken above, trading the Lithium ETF and Lithium stocks in general is presently off the table. If the double bottom can trigger though above 30.56 then all this will change, and we will be back looking for trading opportunities on the long side. For now though there is no reason to be involved.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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