ASX 200: three stocks to watch as of 23 January

ASX 200 overview

The ASX 200 added 17 points (0.57%) on Friday to close at 7452, locking in a 1.7% gain for the week. With a week left, the ASX is up 5.87% for January, reclaiming all of December’s losses and more to be just 2.3% below its all-time highs.

At a sector level, the influential Financial Sector kicked into gear over the past fortnight to be +4.68% for the month and the year. At a stock level as per last week’s closes:

• Macquarie is +8.29%
• CBA is +5.91%
• NAB is +5.12%
• ANZ has added +4.61%.

Elsewhere, the Materials Sector, which now accounts for 32% of the index, has captured headlines after a mammoth 9.68% rally in January. Some of the more notable moves this month have been:

• Sandfire Resources +16.36%
• Mineral Resources +16.13%
• Fortescue +10.19%
• BHP + 9.47%
• Rio Tinto +9.27%.

Drilling down a little further into the Materials Sector despite the price of Lithium trading 20% below its November highs (on forecasts for supply to outpace demand), ASX listed Lithium stocks continue to generate strong trader interest.

In this week’s Three Stocks to Watch, we review the recent news and charts of three ASX-listed lithium miners.

• Pilbara Minerals (PLS)

Pilbara Minerals is our preferred play in the lithium sector as one of the few producers operating at a profit. Pilbara’s production and export volumes have increased over each of the past three quarters, and its cash balance stands at almost $ 2.4 billion on a market capitalisation of $ 12,472m.

Pilbara’s share price added 13.18% to $4.55 on Friday after a production update (released Thursday) beat forecasts by 16% and its shipment forecasts by 4%.

Friday’s surge higher rally has triggered a break of the downtrend from the triple high at $5.60/66 and indicates a medium-term low in place at the early January $3.57 low. Upside targets are resistance at $5.00, followed by the $5.61/66 triple high.

Pilbara Minerals daily chart

• Liontown Resources (LTR)

Liontown Resources with a market capitalisation of $3,437m fell 8.33% to $1.37 on Friday after warning of cost blowouts at its Kathleen Valley site. Originally expected to cost $240.5mn to develop in 2019, the project is now expected to cost $895mn, the fourth time costs have blown out since 2019 on strong inflationary pressures.

The share price of Liontown has spent the past seventeen months trading between .84c on the downside and on the topside, the double top at the November $2.22 high.

The decline from the November $2.22 high appears to be missing a leg below the December $1.195 low, which would complete a five-wave Elliott Wave decline. With this in mind, we would only consider buying Liontown Resource shares after they fell below the $1.195 low, ideally into the support ahead of $0.84c.

Liontown Resource daily chart

• Core Lithium (CX0)

A bearish research note from Goldman Sachs on the Lithium Sector in mid-November was the catalyst for many ASX-listed Lithium miners’ share prices to tumble between 30 and 50%. With a market capitalisation of $2,198m, Core Lithium was not spared as its share price fell 50% from $1.88 to .94c.

Its share price rebounded back to $1.27 during the first weeks of 2023, only for Goldman Sachs to publish a follow-up research note on the 12th of Jan reiterating its sell rating on CXO and a $.95c price target. Its reasons were based on the rally in January running ahead of fundamentals and production risks associated with the ramp of the Finniss project.

Technically the share price of Core Lithium appears to be missing a final leg below the December $0.94c low, where we would be interested in being a buyer.

Core Lithium daily cahrt

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