Albemarle Corporation (NYSE: ALB)’s recent journey on the stock market mirrors the rollercoaster ride of the lithium industry. From commanding over $300 a share to plummeting to around $110 between November 2022 and April 2024, the company’s fortunes have been tied to the volatile lithium prices, which nosedived from over $80/kg to under $20/kg.
In the first quarter of 2024, Albemarle faced a tough quarter financially. Despite beating EPS expectations by $0.03, its revenue plummeted by a staggering 47.26% year-over-year, missing estimates by nearly $2 million. This stark decline was primarily due to the freefall in lithium prices, which hit Albemarle’s bottom line hard.
To weather the storm, Albemarle implemented cost-saving measures and initiatives to improve efficiency, which yielded over $90 million in savings in the quarter. They also took steps to enhance pricing transparency in the lithium market. Looking forward, the company hinted at the possibility of trimming capital spending if lithium prices stay low.
With Albemarle’s fate closely tied to lithium prices, investors are now turning to technical analysis to decipher where the stock might be headed next. Let’s dive into the charts to see what insights they might offer about Albemarle’s future performance.
Support level not broken despite persistent downtrendOn Albemarle’s long-term chart, we can see that after the strong upward move during the post-COVID rally fuelled by rising lithium prices, the stock was on a persistent downtrend between November 2022 and November 2023. We can also see that the stock formed a head and shoulder pattern during this journey.
The head and shoulder pattern usually suggests a further downward move if the support level is broken. However, the stock has not broken its support level at $105 and has been trading in a range since November 2023.
The stock has not broken below or above this trading range between $105 and $145. For investors who already own the stock, as long as the stock doesn’t go below $105 they can continue holding it. For investors looking forward to buying the stock, they must wait before it breaks above $145 and closes above it for 2-3 days.
Short-term range-based trades could workTaking cues from Albemarle’s long-term chart, we can see that even in the short-term hourly chart, the stock has been range-bound for a long time. There is no strong momentum in either direction – up or down.
To take advantage of this range-bound movement, short-term traders must wait for the stock to reach the upper or lower boundaries of this range. They can short the stock when it reaches near the $145 level while keeping a stop-loss at $152. They can book profit near the $105-$110 levels.
Conversely, one can buy the stock near $110 while keeping a stop loss at $103 and book profits near the $140-145 level.
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