Sector getting very volatile - which way will it flip?.
From a weekly perspective, WC8 dropped from 32 to 27.5. Much higher volume for the week.
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So what is happening? The sector is becoming very volatile. But its a uniform play. Chinese stocks are the most volatile. Some has rubbed off to US Li stocks. Least volatility in ASX Li stocks.
Chinese stocks 5 to 10% swing in a day is now becoming common. Its also an indication of slight indecision. Looks like punters are still uncertain, something which I have been writing for last 5 weeks. So when it rises, everyone piles in - FOMO too. But when it falls, those on the edge give away easily. So we see this wide swings. ALB too doing wild swings of 5 to 10% in a day, in both direction. So following the Chinese in that perspective, maybe not on Share Price though. Lagging there, for now. ASX Li stocks barely reach 10% swings in a day, even 5% is sometimes only. There are many which do much lower swing in a day.
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So why this swing and volatility? Plenty of confusion. Sector has been battered for close to two and a half years. When it tries to come back, many don't believe it. On the flip side, some start believing we may see a repeat of 2021/22 play when Li stocks 100s and 1000s of percentage gain. Now we are getting slightly better signal from spot price. But then there is Trump factor, which has again put a question mark.
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So lets take stock of where we are this week.
What was positive this week:- Chinese stocks are still doing very well. They had a miserable last 2 days though, big drops, but still were ahead.
- Ganfeng gained around 8% for the week, Tianqi, just a small green. Both gained around 5% last week. So back to back decent green
- Ganfeng reached 45.30 this week. Its 52 week high is 45.62. It came close. Just 2 months back and before, from September and before, every week there was a talk of whether Ganfeng is going to make a new 52 week low. First time in over 2 years, we are talking of Ganfeng making a 52 week high. That is a big change.
- ALB this week twice crossed 110. Is now toying with how to stay above 106. At least trying.
- ALB reaching 111, this was the highest number in last 5 months, since June
- PLS the biggest ASX Li stock gained 5% for the week
- LTR too above last week, around 2.5%
- Spot price not tormenting for now
What is negative:
- ALB still below 106 as of today. Its not able to hold 106. At least its finishing above that number, twice this week, but then giving back next day. So still some work to do.
- Chinese stocks dropped big last 2 days. So have given away some momentum back.
- Ganfeng is already down 13% from its high made recently. Needs to hold here. Needs to stay above 37. Currently around 39.
- Many US and ASX Li stocks in deep trouble. Many even making new 52 week lows this week. Big example is PMT
- Business news not helping the sentiment. WC8 AFR article put WC8 into a tiff, a very decent drop now after news. These put a dampner to other stocks.
- Trump factor is very unpredictable. Many punters may think something good may not happen to the sector.
- So although Chinese stocks doing well, the positive impact has not flowed through everywhere.
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Although I have mixed feelings, but my gut feel is still that we may do well in short to medium term. Maybe not immediate short-term, but direction is still positive. Based on trading pattern, odds still favour that overall sector may go higher than lower from here. But that's probability, so no guarantee. I am playing for this scenario, as of now, but I could be wrong. I now have much higher Li stock holding this week compared to last week. So please dyor and check your risk/rewards.
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WC8 was playing macro, but is now suddenly playing the AFR game. There is lot of speculation around it, many things have been written, so I won't go thru that as others may have better knowledge. I am looking at trading pattern and price action. Looking weak. Last 2 days big sells. Maybe lot of shorting. Or genuine sellers who don't want to be in a sticky stock. Lets see.
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Personally, 2 weeks back I wrote that after a good play from 22 to 38, I have been buying for last 3 weeks, my average was 31. After the news came out previous night, I was really in a dilemma what to do. To manage risk, I thought I will get out half on open and then see. So I sold half. I did buy today 3 lots, 31.5, 29 and 27.5. If I had been patient, I could have picked up at 27 rather than average 29. Anyway lets see, my average now 30. So I am down for now for this phase. And its looking very uncertain somehow. These type of scenario we never know what can happen. The only number I can think from support perspective is between 25/26. If this doesn't hold, it won't be good. If its not looking like holding, I may exit and wait. Simply because we don't know, will there be a legal issue etc. Its individual risk/reward. WC8 has been very good to me. Multiple times in last 2 years. So I will take risk till the point I feel I should. Lets see. Next week is important.
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So what may happen next week? As I have written before, it is not unusual to see one country take the lead and other follows after sometime. That is the journey since the bottom in September. US took lead initially. Chinese didn't want to follow. Then they did. Then Chinese moved ahead. US/ASX didn't want to follow. So a work cut-out for US Li stocks tonight to keep that pattern going. After a big fall in Chinese stocks today, one would think, we could have a big red US Li tonight. But they have complemented each other before. Not going together, but listening and following eventually. If we lose this behaviour, we will be in trouble. It won't take much to lose a positive sentiment that is building. So stocks have to be within a range and not fall far behind. Eg ALB finished 100 last week. A green week should be good, but above 98 still positive. Worst case is 92/94 level - if we lose this we are in big trouble. But if ALB get back and finish above 106 tonight, I feel we may have a good next week. Will that happen? Let's hope so. Enjoy your weekend and all the best
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