Has Trump’s "Chip for Rare Earth" strategy backfired?
On the heels of the $5 billion investment JV announcement between {{0|Volkswagen and Rivian (NASDAQ:RIVN), we always like to examine the raw material side.
Lithium plays a critical role in making electric vehicles (EVs).
Here’s why:
- Battery Technology: Lithium-ion batteries, which contain lithium, power the majority of EVs. These batteries are known for their high energy density, long lifespan, and relatively lightweight design.
- Energy Storage: Lithium is highly reactive, allowing batteries made with it to hold high voltage and exceptional charge. This efficiency makes lithium-ion batteries an ideal choice for EVs.
- Supply Challenges: However, global lithium supplies are under strain due to rising EV demand.
The International Energy Agency (IEA) warns of potential shortages by 2025.
While current production can meet demand, future developments and manufacturing methods may alleviate these shortages.
Let’s look at the chart of Global X Lithium & Battery Tech ETF (NYSE:LIT).
Doesn’t it stand to reason that if Rivian (NASDAQ:RIVN), VW and even Tesla (NASDAQ:TSLA) are anticipating a return to EVs in 2025, that lithium is cheap by comparison?
The daily chart shows us that in February LIT had a classic textbook island bottom.
That yielded a decent rally of over 20% from the lows.
Since then, LIT has fallen until yesterday, when it made a new low of 38.87.
Today, LIT gapped up now leaving a potential reversal bottom pattern.
Even more interesting, besides how poorly LIT has performed, is that Real Motion shows a very clear bullish divergence.
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Let’s put it this way:
If EVs are a great investment going forward, then the underlying commodity looks like the bargain of the year!
ETF Summary
- S&P 500 (SPY) 5400 support
- Russell 2000 (IWM) 197-202 tightest range to watch
- Dow (DIA) 40k resistance
- Nasdaq (QQQ) 474 support
- Regional banks (KRE) Watching the range 45-50 CAREFULLY
- Semiconductors (SMH) 260 pivotal
- Transportation (IYT) 65.50 hurdle to clear 64 support to hold
- Biotechnology (IBB) 140 pivotal
- Retail (XRT) 74.50 support key 77 resistance to clear
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) This is all risk on-as long as it holds above 76.50
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