Goldman Sachs Calls a Bottom on Albemarle Stock

Goldman Sachs says the sell-off in the lithium market has gone too far

Jul 3, 2018 at 9:43 AM
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Mining stock Albemarle Corporation (NYSE:ALB) is trading up 2.9% today at $96.23 thanks to an upgrade at Goldman Sachs. The firm lifted its opinion on ALB shares to "buy" from "neutral," saying the sell-off in the lithium market was overdone, providing an attractive entry point to go long on the equity. This matches the general opinion on the Street, where 13 of the 18 brokerages in coverage have "strong buy" ratings in place.

While Albemarle has underperformed so far in 2018, Goldman could be correct in calling a bottom. The $90 mark has contained pullbacks since early March, and ALB bounced from this round-number level just a few weeks back. This area also roughly coincides with a $10 billion market cap, another psychologically important figure.

If the security can in fact find new momentum on the charts, it could cause recent short sellers to cover, which would lead to tailwinds. Short interest on Albemarle has essentially been rising since early 2017, including a 12.1% uptick in the last two reporting periods. Almost 13% of the equity's float is controlled by short sellers, or more than 11 days' worth of buying power, based on average daily volumes.

As for options traders, it's a good time to speculate on near-term ALB options. That's according to its Schaeffer's Volatility Index (SVI) of 28%, which is just 14 percentage points from a 12-month low. In other words, volatility expectations appear unusually muted at the moment.

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