A big buying opp for one sector beckons | Australian Markets

July is all the time a useful month on the subject of trading the market.

It’s as a result of so many companies launched their quarterly outcomes.

These might be useful guideposts, each in phrases of what the businesses say…and how the market reacts.

Earlier within the week I alluded to the truth that lithium companies are within the ‘buy zone’, as my colleague Murray Dawes would possibly say.

As it occurs, the flagbearer for the sector, Pilbara Minerals ($PLS), put out their latest announcement yesterday.

What did they are saying?

Quarterly manufacturing, gross sales and income have been all up. Costs have been down too. They managed to hit their forecasts on varied metrics for the final financial 12 months.

That mentioned, after all prices, the money stability for the company went down.

The stock completed the day up 3%. It’s up 25% for the month.,

Check out the chart…

You can see that PLS appears to be like to be forming the beginning of a new uptrend.

However, it’s not one thing I anticipate to blast off like a firecracker. Lithium pricing remains to be down within the dumps, as we will see off this chart from the PLS slide deck…

The latest rally in lithium names has come from an uptick within the spodumene price. But we’re nonetheless a long method from the growth days.

PLS additionally shared this chart which exhibits that this present price is unsustainable for a lot of the lithium industry.

If you’ll be able to take the long time period view, PLS appears to be like like a good counter cynical alternative right here.

The CEO purchased $1 million in shares just lately too. That’s a vote of confidence if I’ve ever seen one.

Right now, there may be an alternative to scoop up lithium property which can be 50-90% down off their highs.

Lithium has been down within the dumps for 2 years.

The lithium bear market we’ve been in since 2023 is a cyclical stoop in a structural bull market.

We see this all of the time in commodity markets.

For instance, the lithium sector soared from 2015 to 2017 earlier than collapsing in 2018…solely to start out hovering in 2020 again.

Lithium remains to be a small, area of interest market relative to the huge useful resource markets like oil, coal and iron ore.

Volatility comes when you might have a smaller vary of consumers and sellers, and even attainable market manipulation. China dominates the battery provide chain too.

Even so, that sort of factor can solely work for so long earlier than fundamentals bear out.

I can inform you one factor from expertise.

The time to get thinking about commodities is during a down (bear) part.

Why? This is when all of the heat, enthusiasm and overblown expectations are smashed out of costs.

Even higher, you’ll be able to decide up property and initiatives which can be, at the very least partly, already paid for.

We’ve seen all of the basic indicators of a bear market within the lithium sector:

• Mine shutdowns
• Production slowdowns
• Investment deferrals
• Price weak spot
• Sentiment crash
• No IPOs, or capital raisings
• Mining juniors switching away to hotter markets, like gold

You run towards this kind of scenario when it occurs – if the potential repay is big enough. I feel we’re on this wealthy buying zone now with lithium.

We did a related and profitable call like this right here at my service Australian Small Cap Investigator on gold in 2022.

It led us to a 164% return in Spartan Resources ($SPR) in below 12 months, and a 60% return in Bellevue Gold ($BGL) in about half a 12 months back in 2022.

Now we’re going to try to do one thing related with lithium.

If the world auto and power systems are going to run on batteries, meaning they’re going to run on lithium. As but there’s no viable different, at scale.

Demand for lithium is already up 5x since 2020. It may go up 400% more by 2040, and probably a lot more.

A man they call “Mr Lithium”, Joe Lowry, places it like this:

“It is easy to let the current negativity cloud your thinking. The longer term fundamentals remain intact.

“The still immature lithium market gyrates on relatively small under & over supply situations. The last eight years prove it.

“Even in a battery & EV market dominated by China, low cost producers still win in the end.”

If this sounds of curiosity to you, don’t overlook to tune into my colleague, geologist James Cooper, on the alternatives in lithium…and the entire useful resource sector.

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Source: Tradingview.com

Yesterday I identified the very fact the Euro was beginning to dump after the tariff deal was introduced at first of the week.

Overnight noticed one other sharp drop within the Euro and a leap within the US Dollar Index [TSV:DXY].

I’ve just lately been saying that if we noticed the US Dollar heading beneath the latest low close to 96.00 we may see one other wave of promoting.

That chance has switched off for now.

You can see within the chart above when the weekly MACD momentum indicator within the backside window turned constructive after a period of weak spot (the orange circles).

Even although we might even see more draw back again within the close to future, whereas the momentum is constructive on the weekly MACD we now have to remember that a bigger rally may happen.

You may also see that the US Dollar Index acquired fairly close to the buy zone and has seen fairly a sharp fall over the previous six months, so we shouldn’t be stunned to see a restoration bounce.

The energy of the US greenback is rippling by the commodity sector with gold, silver and platinum falling closely in a single day.

Copper additionally noticed a enormous fall of 20% after Trump introduced that the 50% tariffs would apply to downstream copper merchandise moderately than copper itself.

Now that the tariff offers are getting wrapped up and buyers can contemplate their ramifications, a robust US greenback could be the end result few anticipated.