Shares of Kodal Minerals PLC (LON: KOD) are up 195% in May after the company announced that its license application for the Bouguoni lithium project was almost approved by the Mali government, triggering a parabolic rally.
The Malian government approved Kodal’s feasibility study. The company has to update before the official license is granted, allowing the company to start mining lithium at Bouguoni, one of the top 15 lithium projects globally.
Investors who have missed the move so far may be wondering whether now is the right time to jump in, and the short answer is NO! From a risk: reward perspective, this is the worst time to buy the lithium miner’s shares since the shares just rallied almost 200% in seven days.
Kodal Mineral’s shares have formed the now familiar parabolic rally shape, which typically leads to a significant selloff once the buying pressure is exhausted. Stocks rarely move up in a straight line, and when they do, they usually come crashing back down very fast.
Traders who want to buy the company’s shares should sit tight and wait for a significant pullback before establishing any new position. One of the key events to look out for is the award of the Bouguoni mining license, which could trigger a significant selloff.
Kodal’s rally seems like the classic buy the rumour sell the news scenario since the current rally is driven by investor optimism about the mining license approval, which is now almost guaranteed to happen.
However, once the license has been issued, the next big event would be to start producing lithium, which will take time. Hence, the subsequent pullback could trigger a sideways trading range as investors wait for the next significant event.
I wouldn’t put my hard-earned money into Kodal at the moment, despite my long-term bullish thesis on the miner, as the risk is too high compared to the potential gains at current prices.*
*This is not investment advice.
Kodal Minerals share price.
Kodal Minerals shares are up 195.83% in May from their April 30 closing price of 0.120p to their current price of 0.355p.
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