Stocks go up… and they go down. Such is the way of markets.

But sometimes, they go down a lot more than usual… and form unusually long cold streaks that can unlock major opportunities.

That’s the situation unfolding in the ice-cold lithium market. And especially with the company in my crosshairs today – chemical refining giant Albemarle (ALB).

If you’re not familiar with Albemarle, they specialize in energy storage, plus develop and manufacture basic lithium compounds used in batteries and renewable energy generation.

Unfortunately, going green has caused a lot of pain for ALB investors. In 2024, ALB has collapsed 34%, vastly underperforming the S&P 500’s gain of 15%.

But as bad as that sounds, there’s actually some good news in this downtrend…

A rare bullish setup just triggered, happening only twice before, going back to February 1994.

If you enjoy powerful reversion-signal analysis, you’re in for a treat. Read on…

Going Green Is Giving ALB Investors An Ulcer
Albemarle’s lackluster performance isn’t unique. In fact, plenty of lithium miners and producers have been caught up in the downtrend.

A great way to visualize this is with the iShares Lithium Miners and Producers ETF (ILIT). This fund currently holds 49 companies addressing global lithium demand.

Now, keep in mind this ETF is quite illiquid, trading roughly 3,000 shares per day. So I can’t endorse ILIT for trading. Just note the overall painful price action.

ILIT is down 34% in 2024, right in line with ALB. Compared to the S&P 500’s (SPY ETF) 15% gain, the underperformance stands at an incredible 49%:

Rarely is it a good idea to buy into a sharp decline, because you could be “catching a falling knife.” That’s the first rule we learn when trading.

However, Albemarle has now declined for 10 consecutive days. And this level of selling has only occurred three times in the last 30 years.

The chart below shows the current 10-day downtrend (in red), along with the others that occurred in late January 2022 and October 2000.

I included green arrows to make the instances easy to spot:

Now, using the eyeball test, it may not be apparent what came next.

So this is where being armed with cold, hard data comes in handy…

What Happens When Albemarle (ALB) Breaks The Down-Streak
At TradeSmith, we let historical analysis lead the way. We don’t rely on guts or whims for our trading signals.

This allows us to spot potential opportunities hiding in plain sight.

If we review the last two times when ALB shares fell 10 days in a row, here’s what came next:

  • 5 days later, shares climbed an average of 6.9%
  • 10 days later, we saw a 5.5% jump
  • 15 days later, ALB rose 10.9%
  • And 20 days later, we saw average gains of 11.3%

This study shows ALB is due for a healthy bounce. The 34% dip this year looks like an opportunity to buy up shares on the cheap.

But history points to an even bigger catalyst in the 10-day consecutive selloff.

If you’re a trader, consider betting on a bullish trend in ALB for the next 20 trading days.

Regards,

Lucas Downey
Contributing Editor, TradeSmith Daily

3 stocks to Change Your Life [sponsor]
Brace yourself... because I'm about to flip everything you thought you know about dividend investing on its head. I'm going to show you how you can achieve 101% yields from dividends in just a few years. Best of all, it's as easy as buying 3 stocks and clicking a few buttons. And if you invest in these 3 stocks, you'll never have to worry about a bear market again. Folks it's time to take control of your retirement. Let me show you the way. Click here to discover how 20,000 other retirees are earning 101% yields from their dividends.

Source: TradeSmith