Lithium: Reasons To Be Bullish

Technicals | Mar 24 2021

Bottom Line 23/03/21

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 83.53 / 78.00 / 66.68
Resistance Levels: N/A (all time highs)

[Note: The following technical analysis focuses not on the price of lithium itself but on the price of ASX-listed exchange traded fund EFTS Battery Tech & Lithium, with the cute ticker code of ACDC. The portfolio of listed companies in the ETF include not only lithium miners but companies involved in the supply chain and production of battery technology.]

Technical Discussion

Reasons to be bullish:
→ A key resource required in the emerging technology sector
→ Limited producers globally yet growing
→ Europe and China seen as major consumers moving forward
→ bullish Elliott Wave count continues to prove

Price on our Lithium ETF (ACDC) since our last review has tagged 93.58 two sessions ago. So almost to the tick for our Wave-3 target. Yet there are a couple of interpretations we need to forward here. Firstly, and as stated in our video tonight, our minor degree wave-(iv) may still require more time to complete. So it would mean an upcoming minor dip off an overbought position on our divergence indicator, before the wave-(v) of 3 starts to trigger strongly back to the upside …… yet just as valid is that the wave-(iv) has already completed, with price action already evolving to the upside as part of the Wave-(v) of 3. If this is the case then we need to be aware that at some stage very soon an intermediate Wave-3 will be completing..….. ‘

The above from our last review, with the latter appearing to have now played out. This means we now have a Wave-3 locked in, with a Wave-4 in the early stages of evolving. Wave-4’s generally pull back a minimum 23.6% of the previous Wave-3 move, which targets 85.43. A price point that has now been achieved. Yet more typically Wave-4’s pullback a little deeper into the 38.2% retracement zone, which in this case measures in at 80.24.

The other pattern clearly annotated on our chart tonight is the Head & Shoulders. These formations are bearish for a period of time if they trigger via price breaking below the neckline. Which in this case aligns 84.75. If any such move occurs then the pattern target sits at 75.58. So deeper than we would like, yet more than acceptable at the same time if it were to occur. It will still keep price above dynamic support in the form of the 200 day MA. And as stated in our video tonight, no core Elliott Wave rulings will be broken if such price depth were to be achieved over the coming weeks. Overall it continues to remain a bullish chart for mine medium to longer term.

Trading Strategy

We are keeping the Lithium ETF (ACDC) well and truly on our radar over the coming weeks. Specifically in regards to a low risk trading opportunity coming to the fore as part of an intermediate Wave-4 consolidation phase completing.

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