Orocobre Limited (ORE.ASX) – Lithium producers have been some of Australia’s favourite stocks for several years supporting the worlds change turning to renewable energy in the battery space lead by Elon Musk and Tesla.

ORE.ASX

 

Last weeks Tesla Battery Day was hyped up to be an extremely positive presentation that would skyrocket lithium back into the Australian headlines. Sadly, Elon mentioned how Lithium is not scarce and they have also found ways to extract the commodity from the ground using salts in a more environmentally and efficient way than any other producer. This signaled panic and hinted a disconnect from the Australian lithium market which include ORE.ASX.

 

Overnight, Albemartle Corp and FMC Corp (two of the largest lithium producers on the New York Stock Exchange) fell between 2.5 and 2.8 percent.

Key Points:

  • Price holding below the 200 EMA
  • Price holding below the 50 EMA
  • Consolidation below prior range low
  • 50 EMA and 200 EMA may cross supporting further downside.

Key Levels:

Support – $2.20, $1.83

Resistance – $2.65, 200 EMA, 50 EMA

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – $2.54

Supporting Entry – $2.49

 

Candle Reversals for entry

  • Bearish Shooting Star
  • Bearish Engulfing
  • Bearish Dark Cloud Cover
    Bearish Engulfing, Shooting Star, Dark Cloud Cover

 

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

 

IF: Price breaks above $2.69 level and violates 50 EMA – this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

 

Reward / Reward Targets:

Optimal Entry $2.54 – Target 1 $2.20 = 3x Reward to Risk

Supporting Entry $2.49 – Target 1 $2.20 = 1.5x Reward to Risk