This lithium stock is an under-the-radar turnaround story, according to the charts
On the day that Nvidia is reporting earnings post-close, there isn’t much attention on anything else, especially not chemical companies. We’re going to change that, at least temporarily: Albemarle (ALB) has been showing signs of technical life lately, and it should be on our radar screens from both the short-term and long-term perspective. Momentum check First, the bad news: ALB, which is a leading provider of lithium, has been making lower highs and lower lows since topping out in November’22, giving few signs along the way that it’s finally ready to reverse its long-term downtrend. There’s no use in trying to bottom fish a stock that continues to make new lows… until it actually shows a marked change of character. And over the last few months, ALB has been beginning to turn the corner. Thus, said change of character now has materialized. In recent days, the stock has been flirting with its 200-day moving average, which it has had trouble touching (let alone staying above) since early 2023. The 50- and 100-day moving averages have begun to turn higher, as well, with both of them now acting as support over the last two months. The 50-day line is trading at its biggest distance above the 100-day line in nearly two years, too. This is a constructive development. The stock’s 14-day Relative Strength Index (which measures momentum) also has stayed in the upper half of the range since September, which is one of the longest such stints over the last two years. This is another positive trait and a prerequisite for any major shift to possibly play out. Bullish pattern breakout All of this has resulted in the construction of this potential five-month bullish inverse head & shoulders pattern. Again, ALB has tried and failed to stay above the formation’s neckline over the last two weeks, thus, we need a better effort this time. If the stock can, in fact, see an upside follow through soon, then the measured move target would be up at $138. The MUCH bigger picture From the November 2022 top to the August 2024 low, ALB cratered 80%. While that’s the biggest peak to trough move over the last 20 years, the stock has endured three other big multi-year declines, totaling -70% (2007-09), -50% (2014-15) and -70% (2017-20). When those monstrous downturns ended the last three times, ALB has rallied strongly over the next number of years and made new all-time highs each time. The resulting percentage up-moves speak for themselves: +370% (2009-11), +250% (2015-17) and +600% (2020-22). Again, this isn’t a short-term phenomenon. It very well could take years once again for ALB to get back above its last high at 334. Past performance is no guarantee of future results, but patterns have the tendency to repeat – both over the short-term and long-term. For this process to continue now, ALB must first extend from its latest daily pattern breakout. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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