ChartWatch: ASX lithium’s last gasp (Spoiler: Only 1 out of these 20 charts isn’t struggling!)

Lithium stocks are a touchy subject among many Aussie investors. Many still love them, while many have grown to regret ever owning them.

By February, interest in the ASX lithium sector had almost evaporated like brines in the Argentinian high desert. But then came “the” rally. Finally lithium prices bottomed, led by a 40%-odd rally in lithium carbonate.

This triggered a new bout of speculative bottom fishing and short covering in ASX lithium stocks. Judging by social media chatter, we’d turned the corner. The suffering was over.

Unfortunately, lithium minerals prices are tracking lower again, and the rallies in the vast majority of lithium stocks are fading fast. This is therefore the perfect time to conduct a comprehensive technical analysis sector review to try to determine where ASX lithium stocks might be headed next.

It’s a big list, twenty of them, so I will be brief where there’s little sign of short term excess demand to warrant further investigation at this time. Spoiler alert! As we’ll see, there’s one chart which appears to be head and shoulders above the rest (TA pun intended! 😁).

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20 of the top ASX lithium stocks sorted by market capitalisation

I have listed for your reference 20 of the top ASX lithium stocks sorted by market capitalisation in the table above. This should help you visualise recent and longer term performance. It’s also the order we’ll tackle them in today, after we check out lithium minerals prices, that is. (Note: for various definitions used throughout, please see the Key at the bottom of this article)

Lithium Carbonate & Spodumene Concentrate 6%

The GFEX lithium carbonate futures chart shows a return to supply-side control

Lithium carbonate futures on the Guangzhou Futures Exchange enjoyed a 46% rally from the RMB 85400/t low to the recent peak at RMB 125000/t. Since then, the price action compressed into a tightening range of falling peaks and rising troughs.

Unfortunately for lithium bulls, yesterday’s close below RMB 109400/t began a new price action downtrend and confirmed the supply-side is once again in control. The large black candle with close on the low signals likely unmet excess supply in the system which could continue to drive down the price.

The next crucial zones of historical demand are at RMB 103400/t-106000/t and then RMB 85400/t-92700/t. A close below RMB 85400/t would confirm the commencement of a new bear market phase. This is the nuclear option for lithium bulls.

On the other hand, it would take a close above RMB 125000/t to recommence a price action uptrend and confirm the demand side has regained control of price. Until then, a return to demand-side candles or to rising peaks and rising troughs is required to signal the demand-side has regained any control.

Spodumene concentrate is still in a short term uptrend

Spodumene Concentrate 6% has enjoyed a 32% rally from the US$830/t low to the recent peak at US$1100/t. The short term trend is up and the price action is rising peaks and rising troughs – both indicate demand-side control.

As long as this is the case, the price can continue in trend, whereas a close below the short term uptrend ribbon or a reversion to falling peaks and falling troughs would indicate the emergence of supply-side control.

This price tends to lag the GFEX futures price, so keep a close eye out for signs of the trend change demonstrated there 🤞.

Mineral Resources (ASX: MIN)

MinRes’s chart is head and shoulders above the rest, but can it stay that way?

ST/LT Trends: ⬆️/➡️

Price action: 📈

Candles: ⬜

Key Support / Resistance: 28 Dec peak high @ 70.97 / 15 Mar trough low @ 64.52

Commentary: Coincidently the spoiler stock is up first by virtue of it having the largest market cap of the twenty on the list!

MinRes is showing a strong short term uptrend, good price action, and predominantly demand-side candles. Together, these are a sign of accumulation and a buy the dip mentality among market participants.

The MinRes price has closed above the dynamic supply expected from the long term trend ribbon (now neutral), and even better, it has tested and held it two times. This suggests the long term trend ribbon has transitioned to offering dynamic support (a key long term uptrend trait).

70.97 is the key historical supply point. Above this, there are a couple more in close proximity at 74.77 and 77.44, which means even if there is a break, further upside may be hard fought. Demand side support is at 64.52.

Watch for supply signals at 70.97, i.e., supply side candles and/or a return to falling peaks and falling troughs which would be bearish. Otherwise, demand-side candles near 70.97 should pave the way for its break and subsequent testing of higher retracements.

A close below the short and long term trend ribbons, and/or below 64.52 would indicate the supply-side is back in control.

Pilbara Minerals (ASX: PLS)

The short covering rally is a distant memory…

ST/LT Trends: ➡️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 29 Jan peak high @ 3.70 / 4 Mar peak high @ 4.58

Commentary: The short covering rally from 3.45 to the now-major peak at 4.58 is a distant memory, replaced by a return to predominantly supply-side candles and falling peaks and falling troughs. Read this as: The demand-supply environment for PLS has returned to supply-side control.

3.45-3.70 is now the key historical zone of demand, but there’s several potential demand points into 3.25. This means it will likely be difficult for PLS to close lower than this zone of potential support without some very motivated excess supply. The last line of defence is 3.10.

Demand-side control equals predominantly white candles and rising peaks and rising troughs, it also means taking out excess supply at the likes of 4.04, 4.27, and ultimately, at 4.58.

Until these events occur, there’s no reason why the supply side can’t remain in control of the PLS price, and therefore probe downside points of demand.

IGO (ASX: IGO)

Didn’t really bounce

ST/LT Trends: ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 22 Jan trough low @ 6.76 / 4 Mar peak high @ 8.47

Commentary: Hardly even a bounce here, and that speaks volumes just as much for the continued motivation of the supply side as it does for the lack thereof of the demand-side.

I don’t need to spend long on this one because there are so few signs of excess demand in this chart. Without them, for the trend follower, there’s nothing to see here…move on.

Unless you’re into shorting, that is. Because there’s a very well-established set of downtrends, price action, and candles which indicate near-total supply side control.

I suggest a close above 8.47 is required to signal enough demand has returned to move the dial away from total supply-side dominance, whereas a close below 6.76 simply confirms it and sets IGO up for a deeper decline.

Liontown Resources (ASX: LTR)

The bounce was short lived

ST/LT Trends: ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 23 Feb trough low @ 1.07 / 13 Mar peak high @ 1.555

Commentary: A promising short term uptrend has been snuffed out here. The supply side’s fingerprints are once again all over this chart: black candles, falling peaks and falling troughs.

The elimination of historical demand at 1.205 paves the way for probing of lower demand points at 1.07. and failing this, at the major trough at 0.875.

Again, a return to demand-side candles and higher peaks and higher troughs is required to signal the demand-side has regained control, but ultimately, likely a close above 1.555 and the dynamic resistance of the long term downtrend ribbon.

Arcadium Lithium (ASX: LTM)

Hardly any bounce at all, what does that tell you about the demand-supply environment?

ST/LT Trends: ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 21 Feb trough low @ 0.105 / 2 Feb peak high @ 0.145

Commentary: Similar to IGO in that there was hardly a bounce at all. This really isn’t a very good look for a stock if its peers did show meaningful signs of a rally. It’s a good indicator the stock is out of favour with fund managers.

Just as there’s not a great deal of data here in the chart because, post-Allkem, the LTM chart is relatively new, there’s not a great deal of indication of any demand-side participation.

It’s a wall of supply with 6.48 the only discernible major point of demand. Below that, I suggest the prevailing short term trend continues.

Wildcat Resources (ASX: WC8)

Concerning candles and price action creeping in

ST/LT Trends: ⬆️/⬆️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 21 Feb trough low @ 0.105 / 2 Feb peak high @ 0.145

Commentary: On first pass, this one looks substantially different to the first five. A clear double-green setup with well-established and rising short and long term uptrend ribbons.

But scratch a little deeper into the price action and candles, and there are some major issues with the likely sustainability of those uptrend. Candles have switched back to predominantly supply-side, and price action is back to falling peaks and falling troughs. Each indicates the return of supply-side control.

Historical points of demand at 0.63 and 0.57 are now important. A close below the first setups up the probing of the next, and so on.

Once again, demand-side candles and a return to higher peaks and higher troughs is required to signal a return to demand-side control. More importantly though, a close above the major peak at 0.795 is required to recommence the short term uptrend.

Develop Global Ltd (ASX: DVP)

Equilibrium between demand and supply-sides equals sideways price movement

ST/LT Trends: ➡️/⬇️

Price action: ⬅️➡️

Candles: ⬜⬛

Key Support / Resistance: 13 Mar trough low @ 2.25 / 4 Mar peak high @ 2.59

Commentary: A super interesting set of technicals here. Unlike many of the charts above, it appears the demand-side in DVP is trying to put up a fight. Balance this against a still-motivated supply side and you get equilibrium.

I see equilibrium in candles, price action, and in the trend ribbons (at least the short term trend ribbon). The long term trend is the key tie-breaker here, it’s still down.

Key points to tell you who’s won the equilibrium battle: A close above 2.59 signals demand-side control, but even then, the long term trend ribbon will likely continue to impede up-side price action; A close below 2.25 signals supply side control and the likely probing of lower demand points at 2.07 and 1.86.

Latin Resources Ltd (ASX: LRS)

Just too much supply at the long term trend ribbon

ST/LT Trends:  ⬇️/➡️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 6 Feb trough low @ 0.125 / 4 Mar peak high @ 0.235

Commentary: It looks like supply has again wrestled back control of the LRS price with a resumption of falling peaks and falling troughs and a switch back to predominantly supply-side candles.

The long term trend ribbon is proving to be a major dynamic supply zone. Until the price closes above this barrier, and I suggest also the historical supply point at 0.235, there’s little to do but wait and watch.

The next lowermost point of historical demand is 0.125.

Vulcan Energy Resources (ASX: VUL)

Promising, but next move needs to be up

ST/LT Trends: ⬆️/➡️

Price action: 📈

Candles: ⬛

Key Support / Resistance: 4 Mar peak high @ 2.72 / 15 Mar peak high @ 3.64

Commentary: An interesting chart here, not the worst, but unfortunately far from signalling abated excess demand in the system either.

It will be interesting to see if we see a resumption of demand-side candles around the key demand point of 2.72. This, and a return to higher peaks and higher troughs, would signal a return to demand-side control. Until then, it’s wait and see, and for VUL bulls – hope that 2.72 holds!

Bigger picture, if the price does close below 2.72 the long term downtrend has likely re-established, whereas a close above 3.64 will confirm a new long term uptrend.

Sayona Mining (ASX: SYA)

Have Sayona shareholders have written off their holdings?

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 29 Jan trough low @ 0.037 / 20 Feb peak high @ 0.072

Commentary: I get the feeling many Sayona shareholders have written off their holdings – anything above zero is a bonus. I can’t say it’s going to zero, but there’s nothing in this chart to suggest even a whiff of demand-side control, and therefore any impetus to move back up again.

There’s so much which needs to occur to make this chart investible again from a trend follower’s standpoint, and to be fair, the trend has been one’s friend or enemy for a very long time on Sayona. It’s been a friend if you heeded it and chose to stay out, compared to an enemy if you ignored it and chose to stay in.

No interest until a close above key historical supply at 0.072, I suggest.

Ioneer Ltd (ASX: INR)

A small uptrend, but an uptrend no doubt!

ST/LT Trends: ⬆️/⬇️

Price action: 📈

Candles: ⬜

Key Support / Resistance: 19 Mar trough low @ 0.16 / 6 Nov 2023 peak high @ 0.19

Commentary: We’re in the back half of today’s list, and in terms of a whiff of demand-side control, I can definitely smell something! A well-established short term uptrend with rising peaks and rising troughs, and if I squint, predominantly demand-side candles.

There’s a bit of squinting going on here, though. The short term uptrend is making only modest progress in the face of the elephant in the room, the looming long term downtrend ribbon.

INR’s technicals are better than many in this list, but I’d like to have another look at this one when it finally gets itself back above the long term downtrend ribbon.

Core Lithium Ltd (ASX: CXO)

Ditto with Sayona

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 19 Mar trough low @ 0.155 / 4 Mar peak high @ 0.26

Commentary: I could just go ditto with the other ASX lithium sector disaster, Sayona. Actually, I will. Ditto – there’s nothing to see here in terms of demand-side control. Skip!

(No interest until a close above key historical supply at 0.26, I suggest.)

Piedmont Lithium Inc (ASX: PLL)

Ditto with Core LIthium

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 9 Feb trough low @ 0.175 / 4 Mar peak high @ 0.25

Commentary: Keep skipping! No redeeming features in terms of exhibiting demand-side control. Hey, don’t get angry at me if this is your favourite lithium stock! I don’t create demand and supply in the market.

There’s a reason why there’s a total vacuum of demand and a wall of supply for PLL shares – not that I know what it is…I’m just saying there absolutely must be one. It’s the only way you can get a chart like this.

Perhaps your view of the stock is at odds with the market’s? Perhaps the market does have it wrong and sanity has flown out the window and PLL, or CXO, or SYA (or whichever) is a bargain?

Time will tell. But fighting the market will only bring frustration and disappointment in the meantime!

(No interest until a close above key historical supply at 0.25, I suggest.)

Atlantic Lithium Ltd (ASX: A11)

Ditto with Piedmont Lithium

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 8 Aug 2023 trough low @ 0.34 / 4 Mar peak high @ 0.44

Commentary: Again, don’t shoot the messenger here. Zero indication of demand-side control equals complete and utter supply-side control. Skip!

(No interest until a close above key historical supply at 0.44, I suggest.)

Delta Lithium Ltd (ASX: DLI)

Ditto with Atlantic Lithium

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 23 Jan trough low @ 0.25 / 4 Mar peak high @ 0.365

Commentary: Nope, skip! Sorry, I’m a trend follower not a bottom fisher.

(No interest until a close above key historical supply at 0.365, I suggest.)

Argosy Minerals Ltd (ASX: AGY)

A very promising fledgling short term uptrend snuffed out at the long term downtrend ribbon!

ST/LT Trends: ➡️/⬇️

Price action: 📈

Candles: ⬛

Key Support / Resistance: 6 Mar trough low @ 0.115 / 14 Mar peak high @ 0.9

Commentary: Similar to Ioneer here, as in there are some good signs of demand-side control up until the peak set on 19 March. Unfortunately, there’s also a clear signal the long term downtrend ribbon remains dominant.

A very promising short term trend with several large demand-side candles has flattened under the weight of a reversion to supply-side candles and it will be important that historical demand at 0.115 holds.

A close above the historical supply point at 0.19, but preferably above the long term downtrend ribbon, is required to start a new long term uptrend.

Winsome Resources (ASX: WR1)

Again, that darned long term downtrend ribbon!

ST/LT Trends: ⬆️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 6 Mar trough low @ 0.80 / 13 Mar peak high @ 0.995

Commentary: Another chart where a promising short term uptrend has been snuffed out by the dynamic supply expected at the long term downtrend ribbon.

0.80 is the next key point of historical demand. On a close below it I suggest the short term trend has reverted to down, and therefore lower points of demand at 0.71 and 0.515 may come into play.

A close above 0.995, but preferably also the long term downtrend ribbon is required to signal the commencement of a new long term uptrend.

Galan Lithium Ltd (ASX: GLN)

Back to skip mode >>>

ST/LT Trends:  ⬇️/⬇️

Price action: 📉

Candles: ⬛

Key Support / Resistance: 20 Mar trough low @ 0.37 / 4 Mar peak high @ 0.47

Commentary: Back to skip mode. It’s not me, it’s the chart. I don’t make the charts, I promise!

(No interest until a close above key historical supply at 0.47, I suggest.)

Global Lithium Resources Ltd (ASX: GL1)

Skip >>>

ST/LT Trends:

Price action:

Candles:

Key Support / Resistance: 20 Mar trough low @ 0.52 / 4 Mar peak high @ 0.685

Commentary: Skip. Just so little interest from the demand side…therefore why would a trend follower be interested?

(No interest until a close above key historical supply at 0.685, I suggest.)

Patriot Battery Metals Inc (ASX: PMT)

The long term downtrend ribbon takes no prisoners!

ST/LT Trends: ➡️/⬇️

Price action: 📈

Candles: ⬛

Key Support / Resistance: 6 Mar trough low @ 0.82 / 4 Mar peak high @ 1.035

Commentary: Another which is showing some fight from the demand-side, but unfortunately again, it’s also showing too much supply acting around the long term downtrend ribbon.

It’s important the price continues to close above historical demand at 0.82 to stave off a deeper decline. On the other hand, only a close above 1.035, but preferably also above the long term downtrend ribbon, is required to establish a new long term uptrend.

Conclusion

There’s some good, but unfortunately too much bad and just downright ugly in the charts of this ASX lithium sector review. Good technical analysis doesn’t predict, because this is impossible – the future is unknown. It only reacts to changes in the demand-supply environment, discernable from the candles and the price action.

If I had a negative view from a technical perspective of your favourite lithium stock, remember, the future isn’t written and those all-important demand-side candles may be just around the corner. I hope this turns out to be the case.

It’s never too late though to start learning more about technical analysis and how to use it to help keep you out of spiralling downtrends – regardless of how good the fundamentals of a company may appear at first.

You can email me at [email protected] with any questions, comments, or requests for future ChartWatch analysis.

Carl’s Technical Analysis Methodology Key

Trends (ST Trend ribbon: 21 & 34 EMAs || LT Trend ribbon: 144 & 233 EMAs)

⬆️ = Uptrend, the ribbon is rising indicating a higher probability the market is in a general state of excess demand

⬇️= Downtrend, the ribbon is declining indicating a higher probability the market is in a general state of excess supply

➡️ = No trend, the ribbon is flattening indicating a higher probability the market is in equilibrium

Price Action

📈 = Rising peaks and rising troughs indicating buy-the-dip activity and supply removal (i.e., indicating a higher probability market is in a general state of excess demand)

📉 = Falling peaks and falling troughs indicating sell the rally activity and demand removal (i.e., indicating a higher probability market is in a general state of excess supply)

⬅️➡️ = Neither of the above scenarios, market price action is indecisive

Candles

⬜ = Predominantly demand-side candles in the recent past, i.e., white bodies and or downward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess demand)

⬛ = Predominantly supply-side candles in the recent past, i.e., black bodies and or upward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess supply)

⬜⬛ = Mixed, i.e., indicating no discernible trend towards demand-side or supply-side candles in the recent past