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Electrovaya – Speculative Buy – Not Yet Suited For Investment

Electrovaya, Lithium ion batteries and energy storage

The statement on the company website describes its activities with:

“Electrovaya is a vertically integrated Lithium Ion battery supplier, that designs and manufactures everything from cell components to turnkey systems for the clean transportation, smart grid, renewable energy and material handling markets.”

The company is a pure player in the Li-ion battery and energy storage fields and one of the very few actors of this market segment publicly traded on the stock markets, more precisely it is listed on the Toronto Stock Exchange as TSX: EFL in Canada and on the OTC Best Market as OTCQX: EFLVF in the United States.

From an investment perspective the company belongs to the exponentially growing Lithium batteries, electric mobility and renewable energy sectors of the economy and this is the primary factor that retains our attention.  Unlike many other players or large companies in this market segment it has not yet significantly penetrated the market and still trades as a small cap. Any positive news such as a major contract could potentially return enormous value to investors over the long term and considering the company’s modest market capitalization it could as well be a take-over candidate.

Price Breakout then Corrective Move

This said speculating on reasons why the stock price could take off is not really our approach is far less fundamental but more technical and on the weekly $EFLVF price chart there is a very clear frontier between bull and bear conditions identified by the black line that is slightly trending upwards.

As long as the price hovers above it the odds are in favor of a reversal to the upside but a break below could initiate a deeper price collapse. Following the initial breakout the resistance now turned support (what is called “inversion of polarity) was retested. The complete bull sequence appears impulsive and from the price peak in the $3 the down trend has the hallmarks of a corrective move.

2017-10-13_Electrovaya

Watching out Electrovaya weekly price chart for reversal signals

Building a foundation

The recent ‘shooting star’ signal below the negatively trending 30-period moving average portends more bear potential and needs to be countered with an inverse positive signal above the trend line and by a progressive stabilization and reversal to the upside of the moving average and this is what we will be observing over the coming weeks.

Strategy

  • Speculative buyers could buy at the present price level with a major downside risk in case of a break below the trend line.
  • Our typical investment criterias are not yet fulfilled especially regarding the orientation of the moving average and investors should wait for a clear technical reversal pattern on the weekly price chart to take shape combined with a stabilization of the 30-period moving average.
  • For that reason we will not include it in our list of purchase decision ideas yet but will follow up and update our readers about the evolution of the technical situation via our tweeter feed and this – as always – completely for free.
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