This Unloved Commodity Play May Be Forming a Bottom

Commodity markets make big moves both higher and lower. Those moves can last for years. Sometimes, there’s a broader trend that can push a commodity market in one direction or another.

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  • Right now, the lithium market is out of favor. The biggest driver of demand is for electric vehicles (EVs). With a number of automakers scaling back EV plans, lithium prices have been dropping. But there are some signs of a turnaround.

    One sign comes from leading lithium producer Albemarle (ALB). Shares have been hovering near a 52-week low in the $110 range for some time, but can’t seem to break lower. However, Albemarle just reported great earnings.

    That could be an early sign of a turnaround. It may not mean a big rally soon. But improving fundamentals make it more difficult for a share price to drop lower.

    Action to take: With shares down nearly 60 percent over the past year and hitting resistance, speculative investors may want to look at buying a starting position here, and use any drop lower to add to that stake.

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  • Albemarle also pays a 1.4 percent dividend.

    For traders, the June $145 calls, last going for about $6.30, should deliver mid-double-digit gains or better on a continued rally from here.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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