Lithium stocks had an amazing close of the year (20 20). No surprise, there has to be a correlation between the electric vehicle trend and the inputs into the market, lithium batteries being one of them. It is rather clear from the charts that lithium stocks will perform well in 2021. We have a bullish lithium stocks forecast for 2021. No coincidence, our rare earth metal stocks forecast for 2021 is also bullish. We add this as another bullish 2021 forecast in our series of global market forecasts.
We will keep this article short and chart focused. We look at the lithium price chart and the LIT ETF lithium stocks charts, both on a longer timeframe.
Our foucs is on lithium miners that deliver inputs for batteries in the electric vehicle space.
Interestingly, lithium stocks performed well despite a rather low lithium price. Clearly, momentum in lithium stocks was caused by the electric vehicles trend.
The lithium price looks to be in a major basing phase now, and it looks like it is coming out of this base. This implies that there is more upside than downside potential in the lithium price.
Is this the next driver for lithium stocks, next to the electric vehicle trend?
Imagine what will happen with lithium miners once the lithium price doubles, as the trend looks to have started recently and the price has some 80% upside potential until it hits a first resistance area (80000).
There is some fundamental research that underpins higher lithium prices in 2021 (source) but our followers know by now that we don’t look into fundamentals. We stick to the chart and price action, without technical indicators, which results in ‘price combined with price’ as our mantra.
Commodity research find Roskill has a very bullish view on a secular lithium trend driven primarily by rechargeable batteries (source):
In any case, the underlying demand growth for lithium compounds remains strong, with demand from rechargeable battery applications forecast to exceed 220kt LCE in 2020, representing roughly 70% of total lithium demand.
Roskill’s longer term scenarios show strong growth for lithium demand over the coming decade; Roskill forecasts demand to exceed 1.0Mt LCE in 2027, with growth in excess of 18% per year to 2030.
The very long term chart of LIT ETF cleared previous all-time highs (set in 2011, around 48 points). LIT ETF now trades 20% above previous highs.
Let’s be clear, there is lots of power in this market. And this sector wants to move higher in 2021, that’s clear. This is the basis of our bullish lithium stocks forecast for 2021.
However buying all-time highs may be a good idea, but isn’t always a great idea.
We would prefer to buy the retracement. And the ideal entry price would present itself if and when LIT ETF retraces to its breakout level around 50 points, consolidates for a while, and prepares its next move higher. That’s what we will be watching to add a lithium stock to our Momentum Investing portfolio.
Enjoying our work? We invest in market segments in which momentum is brewing, and we do so with carefully chosen positions which we hold from a few weeks to a few months. Our Momentum Investing portfolio was up +95% in 2020. We are interested in commodities stocks, and lithium and cobalt stocks are also on our watchlist. Whenever we believe the time is right + entry prices are attractive, we will take a (small) position in a lithium or cobalt miner in 2021.