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Always Use Lithium Pullbacks as an Opportunity by Ian Cooper
Always Use Lithium Pullbacks as an Opportunity by Ian Cooper
Pay close attention to oversold lithium stocks, like Albemarle (ALB).
After dropping from about $240 to $209.13, the ALB stock appears to have caught strong support and could pivot higher again shortly. It’s also oversold on RSI, MACD, and Williams’ %R, and could potentially run back to $240 on the strength of the lithium story.
Remember, lithium will remain a hot commodity.
For one, supply will not be able to keep up with demand, as the world goes green. In fact, according to Stellantis CEO Carlos Tavares, there’s not enough lithium to go around. Plus, analysts project that demand to jump about 40x over by 2040 thanks to electric vehicles. Even the Biden Administration is still encouraging the development of lithium reserves, as major automakers become concerned about shortages, and an inability to ramp up EV production.
Even oil giants see the potential of the lithium boom. Exxon Mobil, for example, just bought drilling rights for lithium in Arkansas. Chevron is also considering opportunities to produce lithium with all of the demand.
In short, use weakness as an opportunity in lithium stocks, like ALB.
When you look at a chart, it may not always be clear what is happening. Some trends are obvious, of course, but in some cases the market may be undergoing some changes that are not so visible. For that reason, some traders have refined their technical analysis to include indicators that measure the market's momentum, underlying weaknesses and other factors that give them early clues about what the market might do before everyone else can see it.
Many analytical software packages now include a variety of indicators, so you don’t have to worry about doing all the calculations they involve – you just have to apply them to a chart. However, no matter how sophisticated or expensive the program, several introductory points need to be made about indicators in general:
No single indicator is the Holy Grail for traders. If you are looking for magic in a box, you won't find it in any indicator.
No indicator works alone. Indicators provide early alerts, but you must use an indicator in conjunction with other indicators or other types of analysis before you make a trading decision.
Many indicators look only at price, so multiple indicators aren't necessarily the answer if they are all looking at the same thing in a similar manner.
Be wary of "curve-fitting" – that is, applying an indicator to historical data and then trying and trying until you find parameters that work the best. The parameters that provide the best performance in the hypothetical testing may be the ones you want but often they do not do as well in real trading.
No matter how simple and easy an indicator is supposed to be, a beginning user will find it a real challenge to understand and interpret what the indicator is indicating. Until you have gained some experience with an indicator, you would probably be well-advised to tap the wisdom of analysts who have worked with the indicators beforeD. Not only can they explain to you what an indicator does, but they also can relate the indicator's status to the current market situation and what it suggests about taking a position.
Indicators: Moving averages
Perhaps the indicator that is most widely used – and most easily understood – is the moving average. One reason is they give a mechanical trading system a precise price at which to take action without calling for subjective decision-making.
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