Big lithium stocks had a great 2022, in relative terms. Large cap lithium stocks like ALB, SQM, LTHM, all of them in the producer segment, largely outperformed not only their peers in the lithium space but were also top performers in the market, for positions initiated in 2021. We continue to believe that Lithium Stocks Will Be Wildly Bullish In 2023. Not only is the lithium price chart confirming this with the aggressive lithium price breakout but also the comparison between LIT ETF and BATT ETF.
The fundamental case for lithium is simply awesome. We explained in our lithium forecast that the 3 drivers for momentum in the lithium space are in place:
- Lithium price continues its rise.
- The coming supply deficit in the lithium market, fundamentally, is underway.
- Broad markets are likely going to recover (source).
The case for the mega cycle in the broader EV space to qualify as THE Biggest Investing Opportunity Of This Decade is still in place.
When we say ‘broader EV space’ we really mean EVs and their green battery metal commodities (lithium, graphite, cobalt, nickel).
With those drivers in place, let’s look at the question whether investors should prefer lithium miners (well represented by LIT ETF) or the broader EV & battery trend (represented by BATT ETF).
The chart of LIT ETF says it all.
In fact, we see a solid double bottom setup at this point in time, sort a bullish reversal. What stands out is the higher low in Sept/Oct against May/June. This is strongly bullish.
LIT ETF will find resistance near 78 – 80 points. Assuming that it’s a matter of time until it gets near 78 points we believe a triple test of that area could be strong enough to break through that resistance level.
If we compare the above shown bullish reversal setup with BATT ETF which has a broader coverage in the EV and green battery metals space we can see a clear difference. BATT ETF set a lower low in October. While this does not imply that BATT ETF is bearish, it certainly needs much more work to convince the bullish case. Also, the resistance level is further away (16.33 points).
We believe that BATT ETF is worth considering once it clears its falling trendline, between 14 and 15 points. The bullish case becomes more compelling if the 2022 falling trend is reversed (by breaking through the falling trendline). This scenario would make it more likely to be successful if and when the test of 16.33 comes. It would also increase the likelihood of an inverted head & shoulders setup.
Considering fundamental strength in the lithium space, we believe that lithium miners are a better investment in 2023 although we acknowledge that there are some deeply undervalued stocks in BATT ETF. In other words, we recommend to pick out undervalued stocks in BATT ETF but not choose the ETF itself.
Our Momentum Investing team published a lithium stock selection, based on a very thorough analysis of the lithium market. We bring in structure and logic that the lithium market is following. Our update was shared with premium members on October 21st “Lithium & Graphite top stock selection” available in the restricted area of Momentum Investing members!
