Stocks of lithium, solar and electric vehicles are accelerating traders

The past week has been brutal for the bull indices, with the Nasdaq, S&P 500 and Russell 2000 losing between 4.5% and 5.8%. The Nasdaq and S&P 500 broke through their short-term support lines, while the Russell 2000 continues to hang on a thread. From a positioning perspective, I can’t justify switching from day trading to swing trading until the price action improves. At a minimum, it would be nice to see more charts that look like first leg bases than bearish fourth leg continuation breakdowns.

While major averages and most technology areas look bearish, we cannot ignore the resilience in EV, lithium and solar stocks.

I’m an advisor to a private battery storage solutions company that competes with Enphase Energy (ENPH), so I follow the space closely. With all the news about brownouts in California and power grid outages in Puerto Rico, it’s easy to see why investors are flocking to stocks like Enphase. But if you don’t care to know more about energy storage, just pull up a chart from Enphase and you’ll see why momentum traders are long energy storage.

But investors aren’t just buying solar stocks. Companies in the lithium sector are also on investors’ radars. Names like Livent Corp. (LTHM), Albemarle (ALB), Piedmont Lithium (PLL) and Sociedad Quimica Chile (SQM) are all doing incredibly well.

Based on what is happening in Argentina, the demand for lithium, especially from Chinese buyers, is skyrocketing. I have a client who is to drill a lithium brine production well in Argentina in a few weeks. According to the project geologist, Chinese buyers are everywhere and anyone nearby is trying to make purchase deals or acquire any promising assets.

But again, if you don’t care to learn more about the fundamentals of lithium, just look at the charts. While it’s impossible to know how far the lithium bull market will go, buyers don’t seem ready to back down.

And then there is the market for electric vehicles. While the charts of Nikola (NKLA), Proterra (PTRA) and XPeng (XPEV) look terrible, buyers are not giving up on shares of Tesla (TSLA) and Rivian Automotive (RIVN). I’m not rushing to buy TSLA as the stock seems to be stuck between $300 and $200 for a while. But as long as it holds above $200, it’s hard to be bearish. And on Rivian, while I don’t care about truck designs, I’d be interested in stock on a high volume break above $40.

Receive an email alert each time I write an article for Real Money. Click “+Follow” next to my signature for this article.

Comments are closed.