How I Avoid the Oil Slick

Hey There Income Hunters,

One thing I stress to #IncomeHunters is this:

Bag the prize and move on to the next opportunity!

When the macro picture shifts, you have to be quick to make your next move.

Here’s an example: Crude put in a negative price/relative strength index (RSI)  divergence this week — a classic reversal indicator …

So I rotated out of energy and into electric vehicle and lithium plays.

Here’s why: President Biden is already salivating over a massive infrastructure spending bill … and you can mark my words, it will be the biggest we’ve seen yet — I’m thinking $3 trillion large.

Biden is plainly hanging everything on outdoing FDR’s “New Deal,” and I’m going to get ahead of it.

It’s LIT
Any investment into EV must include lithium and batteries, so I chose the Global X Lithium & Battery Tech ETF (Ticker: LIT)…

LIT has corrected after initially soaring following Biden’s election and the Democratic sweep of Congress.

 

LIT Holdings

The ETF is filled with companies committed to moving toward a renewable and sustainable clean energy world … 

Forecasts of future demand for Lithium spike in the second half of the 2020s …

And the price of Lithium has already turned and is beginning to trend higher …

My Trade: I had to get LIT up, so yesterday I purchased a 57/63 call spread expiring in July for $2, giving me a clean 3-1 risk/reward ratio and enough time to get to Biden's “Newer Deal.”

Let’s RIDE

The EV producer I chose is Lordstown Motors (RIDE), which will benefit from a partnership with GM …

RIDE’s Endurance pickup truck offers an excellent price point of $45,000 versus $67,500 for Rivian, its closest competitor…

As the Biden administration looks to promote American-made EV’s, RIDE is likely to benefit by capturing available government and military contracts.

Additionally, RIDE will benefit from a $7,500 tax credit assigned to purchasers of new electric pickups …

Lastly, a recent correction in RIDE offers an excellent entry point …

Bring It Home …

Yesterday, I purchased a RIDE Jul 16 expiry, 17.5/25 call spread for $1.73 …

Risk/Reward is 4.3 to 1, which is reasonable for a $7.5 spread

I went out to the July expiry because that is the likely delivery on the infrastructure package. I have more to buy in the sector, but with the market so choppy I want to leave room to average in.

Two things the market needs is distribution of stimulus checks and the Fed to announce additional support for Treasuries … hopefully that comes sooner rather than too late.

Live and Trade With Passion My Friends,

Griff

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.