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Lithium Stocks: Close to a Fresh Run?
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Lithium has been quite hot this year and the juniors in the sector have ripped. Do I think it is the flavor of the day so to speak? Yes. I am not a long term investor with much money exposed to Lithium plays. However, there is more room to run before implosion, which might be later this year but...not yet. To the contrary, all of the lithium junior stock charts are perfectly setting up for a fresh run to new highs starting as soon as this week potentially. Premium GIL members caught the low risk set up in Lithium X Corp (LIX.V/LIXXF) in March. I recommended it at $1.15 on LIX.V and we flipped it in the high $1's in just over a week for a 60% plus profit.LIX.V is one of the more liquid/established/well backed plays out there. If you can buy a position up to $2.10 CDN or $1.65 on LIXXF, go for it. This could be good for 30-40% in the next 2-3 weeks as LIX.V tests previous highs and/or breaks to new highs in the high $2's-$3 per share. It is a good set up right here because it has had a 4 week consolidation, RSI has cooled, and MACD is about to turn up. Give stop limits a little room and to be more conservative, buy half now and add another half at $1.65-$1.80 if it has another week consolidating. I doubt it, but it could.Another strategy is to buy here while the uptrend is intact (upward slanted blue line on the chart below….needs to close above this to keep its perfect uptrend in place) but stop out if it goes below the rising blue line, OR if it breaks the 50 day moving average. Personally, I added half on Friday and will add another chunk if it pulls back 15-25 cents early this week. If it falls below the 50 DMA, I’ll stop out of the trade altogether for a small loss.Same goes for Lithium Americas Corp (LAC.TO/LACDF) which is established and liquid. Buy up to 75-77 cents on LAC and 60-62 on LACDF. The sector will move together more or less but these two are the top juniors in the space. Another run is very likely coming, I just don't know if it's this week (70% chance), next week (20%) or (10%) that I'm wrong on it altogether!!On LAC you can use where the straight line and 50 day moving average converges as strong support. If it were to break and close below both, I would sell it. However, I bought a 2/3 position on Friday and would add the last 1/3 if we see the slight pullback early this week to the mid-high .60’s.MACD is still above zero on LAC/LIX and are likely about to turn up. If/when the green lines at the bottom right on the charts break through the red lines that is when the breakouts will begin to accelerate. We should see a 30% plus move on LAC as its first stop will be retesting the $1 previous high. For me, I’ll probably sell half of the positions when both stocks are testing previous highs, which should provide some resistance. I think they will break into new high territory but because these are trading positions for me, I am not interested in being greedy. There is 30% plus on the table realistically within a few weeks, which isn’t bad!!I also tried to dig up a “tiny cap” Lithium play that has the potential to provide even more significant upside than LIX/LAC. I ended up finding a very sweet looking chart in Ultra Lithium (ULI.V/ULTXF). This one is thinly traded so be careful. But if the Lithium sector as a whole turns higher as I predict, this one could double or triple pretty quick. It’s at 25 cents and 50 cents would be my guess as an easy target.I’m not bothering to get into the fundamentals of each company or the Lithium space. Why? Because it doesn’t matter. The sector is rising on market momentum and excitement at the moment and all companies involved in Lithium have been running in 2016. I understand the basic bullish premise about the scarcity of Lithium and Tesla as a market driver. However, after the run will come a crash, as happens with every move similar to this one.The action reminds me of graphite stocks in 2012 and rare earth plays in 2010-11. I’m all for taking some money out of the run but I have not dug deep enough to be compelled to get heavily involved in Lithium. My picks today are exclusively based on technical action, which is still very bullish. Markets like this that end up generating lots of momentum and hype, can keep going for a while. I don’t think they are done yet, thus my bet on a fresh leg higher.I am long LAC, LIX, and ULI. I may buy more or sell at any time without notice.For updates on LIX, LAC, ULI and unique ideas on individual mining stocks, please sign up for our free newsletter below.
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Oban Mining: An Aggressive Gold Growth Story
Oban Mining (OBM.TO/OBNNF) is in a strong position, cashed up to the tune of $75 million. Management is one of the more aggressive that I’ve seen and they've done 14 transactions since 2015, gobbling up juniors and taking stakes in others. All of that activity in the depths of the gold bear market may pay off in a huge way and Oban seems to have the team to create a giant. Management calls this the “Next Osisko Mining Corp”, where most of the crew came from after Yamana and Agnico Eagle bought them out for nearly $4 Billion in 2014. The team at OBM has cumulatively discovered over 100 Million ounces of gold in their careers they reckon. That’s a lot of gold!The company already has 5.5MM ounces of gold in all categories in Quebec and Ontario, Canada. Prolific drilling will occur in 2016 with over 100,000 meters of drilling programs planned, so news flow will not be weak. The company has some players involved on the board and in the stock. Osisko Gold Royalties (separate company from the mining corp bought out/referenced earlier) owns just under 20% while Wexford, Dundee, and Sprott combine for another 15%. The only negative I see on the surface is that officers/directors own less than 4%, which in my opinion is nominal. But, it’s not nothing.I see the company as large shareholders in plays I like. One example is Metals Creek Mining, which OBM owns a big chunk of and will very likely buy out at some point. This gives them a solid presence in an attractive camp like Timmins and I see their resource base really flourishing in the years to come. Management knows how to build a mining company and they’ve done it before. Discoveries are inevitable with that quantity of drilling as well so I expect big spurts of enthusiasm in the share price this year.
It looks like we might be chasing the stock but it has “only” gone up 50-60% this year versus many of our favorites having already doubled tripled, and quadrupled. Plus, it always helps to take a step back and look at a longer term chart, here’s the weekly going back to 2014:
This bad boy is just getting started! Since we’ve just broken through the 50 week moving average, I expect the short term to be quite strong for OBM. Look at GDXJ as a comparison on the weekly:
The sector is more closely challenging their 200 week moving averages so Oban has some catching up to do. As long as they don’t announce any huge acquisitions the next couple of months, the share price should outperform the sector. Acquisitions are great but you need digestion periods to integrate and also slow down issuing shares. Oban has done a good job though and proof is their huge war chest post 15 deals.My first target for OBM.TO is $2.50-$3…..closer to $3. Then $5 will be next so we still have room for a triple within 12 months. I’m initiating a strong buy on Oban Mining at $1.59 with a 6 month price target of $3 and 12-15 month target of $5. This is a newer player on the block but could become a darling to institutional investors because they are liquid and will be a several hundred million dollar cap soon. If management pulled off another Osisko, we’re talking 18-20 bagger from here. In this new bull cycle, anything will be possible in time for capable companies that execute and aim big.Here’s a quick plug from management themselves:I’m long shares in Oban Mining and may buy more or sell at any time without notice.For updates on Orban Mining and unique ideas on individual mining stocks, please sign up for our free newsletter below.