Pure Energy Minerals Limited a speculative buy

Apr 25th, 2016 – 1 Comment

Looks to have more in it


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PE LOGOWhat do you think about the lithium mining sector? I have a position in a company called pure energy.

Thanks,

DZ.

 

 

 

Hey DZ,

Thanks for the assignment. This will be the first time that I examine the particulars associated with Pure Energy Minerals Limited (PE TSXV). The company is focused on its 8,000 acre flagship lithium brine project in Clayton Valley, Nevada.

The Clayton Valley has attracted a lot interest since Tesla Motors Inc. (TSLA Nasdaq) announced that it was moving ahead with its Giga Factory near Reno, Nevada. Tesla’s demand for lithium is forecast to squeeze global supplies significantly.  In September of 2015 PE announced that it had signed a supply agreement with Tesla.

From a supply demand perspective it looks like the lithium mining sector will enjoy some sunny ways. Make sure that vigilant surveillance and not marrying the stock are parts of your discipline to help capture profits when they are available.

The favourable economics of extracting lithium from brine in a mining friendly state within a stable country takes some of the associated risk off the table but certainly not all of the risk.

An inspection of the charts will inform my thoughts on PE.

 

 

 

PE

The three-year chart indicates that the stock has enjoyed an incredible ride that started in early 2014 when it moved up and through its 50 and 200-day moving averages. The most significant part of the advance came in July of 2015 as the MACD and the RSI generated buy signals.

The shares broke out hitting close to $0.80 by mid September then turned to retest support along the 200-day moving average near $0.40 by mid December 2015. The stock started a new leg up after the retest taking it to a 52-week high near $1.15.

 

PE2

The six-month chart highlights the bounce off the 200-day moving average near $0.40 and the advance to the 52-week high where it became overbought and pulled back and touched $0.90.

What is evident from the charts is that PE has offered a number of opportunities to take advantage of trading opportunities in a pattern of moves higher followed by retreats to test support.

If you are a buy and hold investor you need to gird your loins when the stock pulls back. In any event be advised that PE is a speculative investment that has a long way to go before it starts to produce lithium from its land base.

Next time I’ll conduct a comparative analysis three energy ETF’s for Paul. The first will be iShares CDN S&P TSX Capped Energy Index Fund (XEG TSX).

 

Make it a profitable day and happy capitalism!

 

Categories: Lithium, Natural Resources
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