Up 120% in 2020, Can the LIT Lithium ETF Hold Its Charge in 2021?

ETF investors can make a play on electric cars with the Global X Lithium & Battery Tech ETF (LIT).

LIT seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Lithium Index, which is designed to measure broad-based equity market performance of global companies involved in the lithium industry. LIT gives investors:

  • Efficient Access: LIT offers efficient access to a broad basket of companies involved in lithium mining, lithium refining, and battery production.
  • Thematic Exposure: The fund is a thematic play on lithium and battery technology.

LIT was a high flyer in 2020, soaring to gains of over 120%. With the rise of electric automakers like Tesla, more strength could be ahead.

LIT Chart

A Tesla Supplier Making Big Moves

Tesla is one of LIT’s top 10 holdings as of December 31, 2020. Its supplier, Contemporary Amperex Technology Co Ltd (CATL) is making big moves in the lithium space.

Per a Yahoo Finance report, CATL “is eyeing increased production capacity to meet the rising demands of green energy vehicle manufacturers. CATL is planning to invest a total of 39 billion yuan ($6 billion) in lithium-ion battery production projects in three cities in Fujian, Sichuan and Jiangsu provinces, CNTech Post reported.”

“With new energy vehicle demand likely to receive an impetus from the quest to contain pollution globally, demand for batteries is likely to increase,” the article added. “Batteries account for roughly 40%-50% of the cost of an EV. They are also central to increasing the efficiency and range of EVs. The expansion of battery suppliers can be considered as leading indicator for EV demand, and therefore should bode well for EV makers.”

Technically Speaking, Is It Time to Buy?

The question now is whether LIT can hold its charge from 2020 into 2021. The fund is up about 20% from its 50-day moving average, and its relative strength index (RSI) indicator has been in overbought levels since the end of November.

What goes up eventually has to come down, but a moving average convergence divergence (MACD) filter shows the exponential moving average (EMA) above its signal line, which typically means a buying opportunity. The volume spike in November and beyond certainly supports the high interest in the fund.

LIT Chart

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