Lithium Recovery LIT LONG - Dec 23 (🐲🏔️JDSMF)

2023年12月23日

The Hypothesis
Since Nov 2021 after the COVID19 spike, Lithium prices have taken a beating and have been trending downwards. My hypothesis is that the previous spike was hype mainly driven by COVID19 speculative behaviour and if we just discount that overvaluation we will be at a fair price that has not included the continual demand, the consumer shift in acceptance and the development of supporting infrastructure.

In my opinion fear has also been factored into price with weaker hands leaving.

There are few reasons for this drop

1. Jan 2022 to Dec 2023 - Back to back interest rate hikes
   
2. Slow down of retail traders after the meme stock boom
   
3. 2023 - Biden’s policies that are restricting the usage and subsidies on CN lithium EV batteries to help US capability catchup
   
4. 2023 Over production of Lithium
   - 2023 - China slowdown resulting in a drop of Lithium orders
   - Sep 23 - Ford Halts construction of Michigan Battery Plan
   

The Parabolic Catalyst

1. EV demand has continued to increase, even if it has slowed in 2023
   
2. Dec 2023 the Fed has announced rate cuts and this will improve liquidity at least for the companies.
   
3. 2023 EV prices are getting closer to combustion vehicles, this will also help spur volume growth
   
4. The key reason I have pegged that the sector is turning around is the acquisition of smaller companies. They have done their due diligence and have determined that the current prices have headroom to grow and are bullish on the future volume needs
   - 21 Dec - Chile's lithium miner SQM joined hands with Gina Rinehart, Australia's richest person and mining magnate, to propose acquiring Perth-based miner Azure Minerals [OTCPK:AZRMF] for 1.1B.
   - LTHM's merger with Allkem is expected to bring synergies and diversification of assets, making it one of the world's largest lithium companies
   - Chinese battery maker CATL and automaker Volkswagen [OTCPK:VWAGY are likely the final bidders for Sigma Lithium NASDAQ:[SGML]

The Fair Price
30.13 in my opinion is a fair price this is 50% of the Pre COVID + COVID19 spike range. However for this trade, I entered at 49.31 with a risk of -39.32%

What Factors Would Break This Hypothesis
The discovery of a new battery material that is lighter and has more range

2月22日

ノート

Exit out of LIT -13.34%, -USD 790. Compared to how the entire market has moved in the past two months. LIT has only showed a continued downtrend. I am not here to prove that my hypothesis is right. I think the money can be better allocated maybe to UAL my other holding which has held it's position and increased (But at a slower pace than I expected)

2月22日

手動でトレードを終了しました