Lithium: Longer Term Bullish

This story features GLOBAL X BATTERY TECH & LITHIUM ETF. For more info SHARE ANALYSIS: ACDC

Bottom Line 28/06/23

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 100.00 (zone) / 90.00-88.00 / 83.50
Resistance Levels: N/A (all-time highs)

[Note: Prices reflect the ASX-listed Global X Battery Tech & Lithium ETF ((ACDC)) in A$]

Technical Discussion

Reasons to be bullish longer-term:
→ A key resource required in the emerging technology sector
→ Limited producers globally yet growing
→ Europe, China, and the U.S are seen as major consumers moving forward
→ bullish Elliott Wave count remains in play

In keeping with our lithium theme tonight we are back reviewing the Lithium ETF (Code: ACDC), along with Tesla and LAC. In our last review, we were having some difficulty positioning exactly where the trend had progressed to, although we were leaning toward the higher degree Wave-(2) or (B) completing at the December lows circa $83.50, with the final Wave-C being very much truncated. It has been a very complex corrective phase off the January 2022 highs yet with price now trading into new all-time highs, the labeling on our chart does appear to be the highest probability one to work with from here.

So off the December lows we are now looking for an intermediate 5-wave move to unfold as part of a higher degree Wave-(3) or (C). For now, it doesn’t matter which one it is as both wave types generally unfold as 5-wave patterns, so both are bullish. The up cycle will be longer lasting though if we are witnessing a Wave-(3) rather than a Wave-(C) but we will concern ourselves with this later on down the track.

So right here and now we appear to have a minor degree wave-(iii) of (3) or (C) complete with a minor degree wave-(iv) either completed or needing a little more sideways before it completes. The gap higher move last night with price closing on its highs certainly embodies a solid session, yet any swing into new all-time highs from here is going to bring some solid-looking Type-A bearish divergence to the table. So this will either dictate that the wave-(iv) will require more time to complete as stated, or it will signal that we have a wave-(v) in play that will quickly complete the intermediate Wave-3 due to the negative divergence. The problem with the latter is that we normally like to see Wave-3’s extend 1.618x the length of the Wave-1. So in this case we wouldn’t be looking for the wave-(v) of 3 to complete until it was closer toward this extension target circa 113.88. Difficult to achieve though if the bearish divergence immediately starts to dominate above the recent high at 105.40!

Trading Strategy

With our trading focus recently being on Tesla, and with our Lithium Americas Corp pending trade also in the mix, we haven’t offered up a trading opportunity on the ASX-listed ETF ACDC. Being in blue sky territory though it has obviously reverted to bullish and does look as though further upside is going to be possible over the coming months. Especially with a 5-wave intermediate pattern still being required to complete either a Wave-(3) or (C). As mentioned, the next swing north is going to bring some strong Type-A bearish divergence to the table so now is not the time to get involved from a trading perspective. Definitely one for our watchlist though.

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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