Yesterday, I took a small position in Lithium Americas Corp. (LAC) stock.
This is a young, $3.7 billion mining company headquartered out of Vancouver, Canada.
However, the company operates mainly in the United States and is currently trying to develop two major lithium mining projects.
The first is the Cauchari-Olaroz project in Argentina, and the other is the Thacker Pass project in Nevada.
As such, the company does not yet have any sales or earnings.
Therefore, this trade idea is one based purely on my technical analysis.
I do like to incorporate a company’s fundamentals in my trading, but they’re simply not always there to analyze.
So, sometimes you just have to rely on a company’s stock chart to lead the way.
And really, with the technical trading strategy I’ve developed over the years, that’s all I need.
Let’s have a look…
As you can see, the stock was in a powerful Stage 2 uptrend that peaked in early December.
It pulled back big when the market plunged two months ago.
Usually, a 45% drop would take any stock off my radar.
But given the high-risk nature of a pre-earnings stock like LAC, the selloff is not all that surprising.
Plus, it never closed below its 150- and 200-day moving averages, so the long-term uptrend is still in place.
When Two is Better Than One
The entry price I’m using is based on the stock breaking out from two technical patterns at once.
First, the yellow downtrend line was broken as LAC traded above the $27 area.
Additionally, we saw a nice volatility contraction over the last three weeks that it is also breaking out of.
Look at the hourly chart below to see what I mean…
Pullbacks decreased from 28% all the way down to 4%, allowing a tight entry point to take a stab at the long side.
I’m keeping a very tight stop on this one to see if it makes the turn here.
If volume comes in and the stock follows through to move higher, I will consider adding on.
Remember, scaling into a trade like this can be a great way to provide yourself with a profit cushion when the stock does eventually break out.
Accumulating a small profit on the first portion of the position can be used to “finance” the risk on the remaining portion.
But of course, if the stock goes against me, I’m out with only a small loss.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
