Lithium roundup: Allkem acquisition, AVZ suspension extension, Core Lithium at all-time highs

Lithium stocks are powering ahead on Monday as investors are buying into the decelerating inflation narrative and become more optimistic about the economic outlook.

Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS) shares, arguably the bellwether for the local lithium sector, were up 3.3% and 1.2% respectively, in the first hour of trade.

Headline round up

• Allkem enters into binding agreement to trade its Minera Santa Rita asset plus US$14m for the Maria Victoria tenement

• Core Lithium commenced a +40,000m drill program across greenfield and brownfield target areas surrounding the Finniss Project

• AVZ Minerals suspension has requested an extension for its voluntary suspension until 1 September 2022 as it finalises its mining and exploration rights for the Manono Project

Core Lithium: In a world of its own

Core Lithium (ASX: CXO) is the gift that keeps on giving, up another 11.2% at noon to $1.64. It's one of those stocks you think would start to show some signs of exhaustion or selling, but keeps on rallying.

Core is one of few lithium stocks back at April highs. The V-shaped rebound back to previous highs could see some profit taking but its momentum is extraordinary.

The company is targeting first lithium production in the fourth quarter of 2022. In parallel ongoing exploration activities plan to support a growing mine life and an investment decision for a second lithium mine.

Core Lithium share price chart (Source: TradingView)

Spot price consolidation

Lithium spodumene and carbonate have largely been trading sideways for the past two months, which isn't all that bad given how they're all up 4-6 times compared to a year ago.

In early August, Pilbara Minerals' eighth spodumene auction posted a bid of US$6,350 a tonne, matching the record auction result in June.

Lithium carbonate has been moving sideways in an extremely tight fashion since early June. Last week, prices inched up from 476,500 yuan to 477,500 yuan a tonne.

Source: TradingEconomics

Thinking about ETFs

The VanEck Rare Earth/Strategic Metals ETF is one of my favourite ways to gauge the overall performance of the lithium and battery metals sector. The ETF has 24 holdings, 42% of which are ASX-listed, including household names like Pilbara Minerals, Allkem and Lynas (ASX: LYC).

The ETF has rallied 35% since early July and needs another 20.5% to take out the early April all-time high.

The V-shaped move does make the ETF rather suspectable to pullbacks, especially given how extended the ETF is from short-term moving averages like the 6 day or the 20 day.

The ETF has an RSI reading of 75, which indicates its grossly overbought. Previous readings over 70 were hit last July and early April.

VanEck Rare Earth/Strategic Metals ETF chart (Source: TradingView)