Outperforming Lithium Stock Bulls Won't Want to Miss Out On

Short sellers are still underwater

Oct 4, 2022 at 10:07 AM
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The shares of lithium manufacturer Livent Corp (NYSE:LTHM) hit an all-time high in September, followed by a pullback to the $30 area -- roughly 1.5 times their July lows and 2018 peak -- and its 50-day moving average. With this solid technical foundation in place, it could be a good time to speculate on LTHM's next move higher.

 

lthm oct 4

Short interest is up 20% since May, and the shares sold short represent more than 13% of Livent stock's available float. Even during the May buildup, the security was able to rally, which implies most of the shorts are underwater still. And while the shares aren't necessarily "oversold," they're no longer considered "overbought," which has led to pullbacks in the past.

Despite an impressive 25% year-to-date lead, analysts are still less than enthusiastic. Specifically, eight of the 17 in coverage still rate LTHM a "hold," and a shift from this pessimistic bunch could provide tailwinds.

Our recommended call has a leverage ratio of 2.9, and will double on a 35.1% rise in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this LTHM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
 

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