Lithium and Graphite Stocks to Rise in 2022

There has been a lot of talk about climate change with the recent climate summit and it has been suggested that part of the way forward is to phase out internal combustion engines because electric vehicles (EVs) are supposedly the way of the future. Indeed, over the last decade, there has been huge advancements in battery technology with lithium-ion batteries the choice for EV production.

Demand for electric vehicles has lithium stocks soaring 

The demand for electric vehicles (EVs) and the batteries that power them has sent lithium and lithium stocks soaring with the demand for EVs expected to rise dramatically over the next decade. Another mineral that is less talked about but just as essential to lithium-ion battery production is graphite. This mineral is currently in phones, cameras, laptops to name a few, as it is the anode material in the lithium-ion battery that contains graphite.

One Australian company set to take advantage of the growth in EVs is Evolution Energy Minerals (ASX: EV1) that listed on the ASX last week after a successful $22 million dollar capital raising. Investors purchased the stock in EV1 at $0.20 and after listing on 16 November, it traded at $0.58 before rising to $0.70 or a 250 per cent gain for those who invested in the IPO. However, by Friday it had traded down $0.47 before closing the week at $0.50 or a 27 per cent drop in price from the weeks high, which is not surprising, given it was an IPO.

It is not unusual to see a lot of excitement with IPOs where investors attempt to stag a profit by purchasing the stock with the intent of selling it for a large profit in the first few days of listing. As such, now is not the time to get into this stock, as there is high probability it will continue to fall away at least in the short term. That said, I suggest you keep watching this stock and the graphite and lithium space for opportunities, as you are likely to find some great stock opportunities in 2022.

What were the best and worst performing sectors last week?

The best performing sectors included Information Technology up 3.05 per cent followed by Healthcare up 2.94 per cent and Communication Services up 1.85 per cent. The worst performing sectors include Financials down 3.57 per cent followed by Materials down 1.65 per cent and Energy down 1.53 per cent.

The best performers in the S&P/ASX top 100 stocks included Crown Resorts up 18 per cent followed by Altium up 9.57 per cent and NextDC up 8.47 per cent. The worst performing stocks included CBA down 9.54 per cent followed by ALS down 7.74 per cent and Bank of Queensland down 5.35 per cent.

What's next for the Australian share market?

As I have mentioned previously, the Financial and Materials sectors generally determine our markets direction and last week both traded down, as did the Energy sector. Given this, despite seven other sectors rising, the All Ordinaries Index ended the week slightly in the red. As such, even though our market rose last Monday to its highest level since 8 September, it is struggling to rise up out of the sideways pattern it has been in over the past month.

While I believed our market would rise until January or February, I am starting to think the opposite might occur. Right now, I would not be surprised to see the All Ordinaries Index fall away up to 5 per cent over the next one to two weeks before rising up into February. That said, if the fall is larger in price and longer than two weeks, we may see a steeper fall in the New Year.

One thing I am sure of is that any move down will be good for the market, as it will set it up for a good year in 2022.

For now, good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.