Down 75% since March. Is Lake Resources (ASX:LKE) a Good Stock to Buy?

By Jason McIntosh | Published 11 July 2022

Lake Resources (ASX:LKE) is an ASX listed lithium developer. It aims to use disruptive technology to produce clean high purity lithium, which is in demand by electric vehicle makers for lithium-ion batteries.

The company’s flagship operation is the Kachi Project in Catamarca Province, Argentina. It is situated in the Lithium Triangle with Lake’s three other projects. Lake says the Lithium Triangle produces 40% of the world’s lithium at the lowest cost.

Lake Resources has a market cap of around $960 million. It was one of the best performing ASX stocks in 2021, and its shares soared to an all-time high in the first quarter of 2022. LKE has also been one of the most actively traded ASX stocks in July.

But the technical picture for the company has deteriorated. The shares fell heavily in June, and then broke lower again in July. The latest fall coincides with the resignation of CEO, Steve Promnitz.

Let’s check out the chart:

Is Lake Resources a good buy?

Lake Resources is down 75% since late March. Some investors will be keen to buy the after such a large fall. But the risk of further falls remains. With LKE’s shares trading below there 50 and 100-day moving averages, the trend is down. Overhead resistance between $1.10 and $1.25 is likely to also prove a significant barrier.

LKE’s shares are currently trading considerably below the 100-day moving average, and a short-term bounce is common in these situations. But until clear signs on a new up-trend emerge, I believe the risk remains to the downside.    

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Meet Jason

I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney. 
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.