My first trade: I was long Global X Lithium and Battery Tech ETF (LIT) from January until Sept. 20, when a bearish engulfing candle prompted me to take profits. In January, I bought at $25.70, and sold in September at about $38, but I stayed bullish on the ETF because I like the sector.

My second trade: As I’d hoped, we got a perfect pullback in LIT, bounced off the 20-period moving average on Sept. 26, and I bought 325 shares at $36.73 on positive trading on the 27th. We’re at that key area again where I sold the last time, so I’m watching the chart this week to decide what to do: I need to see a breakout to signal a buy, but a pullback could prompt me to sell.

Hear Petra’s September interview discussing her plans to sell, and then re-buy, LIT

What I’m watching on the chart: This is the third time LIT has tested a breakout resistance zone at $39.98. I’m watching carefully, because Tesla Inc. (TSLA) is roughly 5 percent of LIT’s holdings, and I believe Tesla is keeping the ETF from breaking through resistance.

Tesla is below the 50-day moving average and showing a potential head-and-shoulders setup here. A break of $330.50 would break the neckline of the head and shoulders and potentially bring TSLA it down to test the 200-day moving average of $314.29.

In order for LIT to break out, Tesla must participate, so Tesla is very much in focus for me this week.

The outlook: The other holdings in the ETF are very strong. If LIT does get a breakout over $39.98, I will add to my position because I think there’s 10 or 15 percent of upside, but that only happens if Tesla comes to the party.

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Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs. At the time this article was published on RagingBull.com, she held 325 shares in LIT purchased Sept. 26 at $36.73; she had no additional shares, options or open orders in the ETF though she was planning to trade it in accordance with this commentary.

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