No Bottom In Sight For Lithium

Technicals | Aug 28 2019

Bottom Line 27/08/19

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 22.81 / 21.42
Resistance Levels: 25.72 / 28.33 / 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 bearish:
→ 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 major top in place
→ Bearish trend continues to dominate
→ major support now reverted to resistance

'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.'  With the 61.8% retracement zone clearly failing to hold, in simple terms the price chart now looks awful. Price has also been oversold on our divergence for about a month yet it has still continued to plummet south.  Dynamic resistance aka the 200 day moving average is what needs to be conquered now to the upside to bring any semblance of positiveness back onto the price chart. Yet with such an outcome meaning a move back above the 27.00 – 28.00 zone, and with price now trading down towards the 23.00 mark, we are still a fair distance away from any price point that will start indicating that the worst is over. In between reviews major support categorically broke down at 25.72 and as such this line in the sand has now reverted to resistance. Nothing to like here for the moment. The trend is categorically down and the bears are in full control.

Trading Strategy

We don't offer up formal recommendations on ETF's as it's not within our scope. Yet they are just as easy to trade as normal stocks. So if a set up occurs that we see as being worthwhile and low risk, then we will certainly alert everyone to it. For now though the trend is down as stated, so unless you are already positioned short, then it is best to just stand aside until the next low risk opportunity surfaces. Whether that be long, via a new trend triggering, or short, via further bearish continuation patterns presenting, remains to be seen. 

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).

Risk Disclosure Statement

THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.

Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms