I last wrote about Lithium Americas on May 6th, taking note of its inclusion in the only Lithium ETF that I'm aware of, the Global X Lithium ETF. Previous to that I put up a post about the chart on April 27th, speculating that I thought the PPS could fall back to 65 cents if the cup and handle pattern I was seeing played out.
- April 27th Blog Posting: Cup and Handle Forming
- May 6th Blog Posting: LAC added to Global X Lithium ETF
On April 27th the PPS closed at 79 cents and on May 6th the close was 70 cents. The lowest its traded between April 27th 2016 and the present is 66 cents, so if this upward move continues I won't have been far off with my 65 cent pull back call. On Friday May 20th, 2016 the PPS closed at 88 cents for a 33% climb of that recent 66 cent low.
Here's the chart:
If this pattern does indeed continue in the manner I'm thinking it will, (no guarantees though) then we should be seeing a closing price above the recent 94 cent close of April 19th when the pull back started and signalled the potential for a handle forming. If that happens, then I envision LAC breaking out to a new and higher trading range north of a dollar.
Not everyone is a fan of technical analysis, or TA for short...I know there are lots of fans when T&A stands for something else though :-)
Some view charts and TA as little more than guessing, like horoscopes and palm reading. Those who hold this view will typically say something like "when good news comes out stocks go up, when its bad stocks go down". And to a degree there is merit in that point of view, because often it does work out that way,
The whole idea behind TA is that it may provide an indication of future direction. We've all heard the old saw about "buy the rumor, sell the news". For my own part I view all the currently available fundamental data as already being priced into a stock. And I also consider it likely that before news comes out, or before a major announcement is made, that there may be some parties in the know trying to profit from it by establishing or adding to a position. I view investors of this kind as being what is often called "the smart money crowd".
What I look at is price volume movements, where a stock climbs on volume heavier as compared to when the price pulls back. For me a climb of 2 cents on volume of 10 million shares trading is more significant than a drop of 10 cents on volume of just 1 million.
***One big qualification. I consider TA to be most reliable when a company is putting out little or no news, and is not engaging in paid promotion.***
One of the tools available to this smart money crowd, especially when its a stock trading for less than a dollar, is short selling. I mentioned in an earlier posting the importance I place on keeping an eye on short selling: Why Short Interest Matters
If I see 10, 20...30% of the issued shares shorted, that to me is a warning flag. Bears are not stupid, and if there have been some large bets placed on a stock falling, then I take that as a potential omen, a sign that bad things may be coming in the future.
In the case of Lithium Americas the short interest is nothing approaching even 10%, in fact as of May 15th 2016 its less and one single percentage point, 0.54 % to be precise.
However the raw number is notable, its just over 1.6 million. Considering the daily average volumes LAC is trading lately, that's a drop in the bucket. I think its very possible that there may be those looking to accumulate LAC, and that short selling may have been used to squelch the upward move in the PPS in an effort to inject some fear and uncertainty into retail holders. You have probably heard it referred to as shaking the tree.
Friday May 20th saw a big jump in trading with over 11 million shares trading hands when all the secondary exchanges are included, (8.8 million on the main TSX). That jump may have been caused by Lithium America's inclusion in a Bloomberg article about SQM which references the deal they struck with LAC for 50% of their Argentinian project. BLOOMBERG ARTICLE
If you're looking for an active forum for LAC then your best bet is Stockhouse where I post with the name ledrog. There's a lot of speculation about SQM potentially buying out LAC. While such a deal would not surprise me, I don't know if there's anything to it beyond idle retail banter and/or hope.
A note on LAC and any stock that I write about. Lithium Americas is a highly speculative investment, and it is not a suitable investment for everyone. Verify all the information I have provided, I endeavor to ensure that everything I post is accurate, but I rely on outside sources for a lot of the information I provide here and I cannot warrant that everything is accurate, and also I could make a mistake.
If you have a comment, or if you simply wish to point out something I may have gotten wrong...please do, the comment field is open. All I ask is for a respectful tone and no profanity or advertising.
Peace
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