Sigma Lithium Plummets 9.55% Amid Lithium Market Volatility – What’s Fueling the Selloff?

Summary
• Sigma Lithium (SGML) trades at $13.115, down 9.55% intraday as of 14:50 ET on 2025-12-29
• Intraday range spans $12.74 to $13.42, with turnover at 1.23 million shares
• 52-week high of $14.63 and 52-week low of $4.25 highlight extreme volatility

SGML’s sharp decline has drawn attention amid mixed signals in the lithium sector. While global demand forecasts for 2026 remain bullish, SGML’s technicals and fundamentals suggest a fragile position. Traders are now scrutinizing whether this selloff reflects profit-taking or deeper concerns about the company’s profitability and leverage.

Lithium Price Optimism Fails to Shield SGML from Profit-Taking
Despite bullish commentary from Ganfeng Lithium’s chairman—predicting a 30–40% surge in global lithium demand in 2026—Sigma Lithium’s stock has buckled under profit-taking pressure. The recent 9% drop follows a 7.33% intraday surge earlier in the week, driven by speculative bets on higher lithium prices. However, SGML’s fundamentals remain weak: a -67% pre-tax margin, 1.87 debt-to-equity ratio, and a -42.89% return on equity suggest structural challenges. The selloff appears to reflect short-term traders unwinding long positions after the rally, rather than a direct reaction to sector-wide news.

Lithium Sector Mixed as SGML Trails Behind ALB’s 4.93% Drop
Sigma Lithium’s 9.55% decline outpaces the sector’s broader selloff. Albemarle (ALB), the sector leader, fell 4.93% intraday, while peers like Standard Lithium (SLI) and Lithium Americas (LAC) also traded lower. The sector’s underperformance reflects profit-taking after a recent rally fueled by Ganfeng’s bullish commentary. SGML’s weaker technicals—compared to ALB’s stronger balance sheet—highlight its vulnerability to market sentiment shifts.

Options and ETFs to Watch: Navigating SGML’s Volatility
• RSI: 78.64 (overbought)
• MACD: 1.33 (bullish), Signal Line: 1.12, Histogram: 0.21
• Bollinger Bands: Upper $14.24, Middle $11.48, Lower $8.71
• 200D MA: $7.28 (far below current price)

SGML’s technicals suggest a short-term bearish bias, with key support at $13.50 and resistance at $14.24. The 78.64 RSI indicates overbought conditions, while the MACD histogram’s positive divergence hints at waning momentum. Traders should monitor the 200-day MA as a critical baseline for long-term direction.

Top Options Contracts:
• SGML20260116P13 (Put, Strike $13, Expiry 2026-01-16):
- IV: 131.14% (high volatility)
- Leverage Ratio: 8.71%
- Delta: -0.43 (moderate sensitivity)
- Theta: -0.0249 (moderate time decay)
- Gamma: 0.1005 (high sensitivity to price swings)
- Turnover: 564
This put option offers asymmetric upside in a bearish scenario. With high gamma and IV, it could benefit from a sharp price drop below $13.50.

• SGML20260116C13 (Call, Strike $13, Expiry 2026-01-16):
- IV: 144.13% (extreme volatility)
- Leverage Ratio: 7.47%
- Delta: 0.57 (moderate sensitivity)
- Theta: -0.0569 (high time decay)
- Gamma: 0.0912 (high sensitivity to price swings)
- Turnover: 6,800
This call option is ideal for aggressive bulls expecting a rebound above $14.24. High IV and gamma make it responsive to volatility spikes.

Payoff Estimation:
For a 5% downside (targeting $12.41), SGML20260116P13 would yield a $0.59 payoff (max(0, $13 - $12.41)). SGML20260116C13 would expire worthless. Traders should prioritize the put for downside protection.

Action Insight: If SGML breaks below $13.50, SGML20260116P13 offers a high-gamma bet on further selloff. Aggressive bulls may consider SGML20260116C13 if the stock rebounds above $14.24.

Backtest Sigma Lithium Stock Performance
The backtest of SGML's performance after a -10% intraday plunge from 2022 to now shows favorable results. The 3-Day win rate is 50.19%, the 10-Day win rate is 55.56%, and the 30-Day win rate is 55.94%, indicating that the stock tends to recover positively in the short term. The maximum return during the backtest period was 6.91%, which occurred on day 54, suggesting that while there is some volatility, SGML can experience significant gains in the aftermath of a substantial pullback.

SGML’s Volatility Warrants Caution – Watch for $13.50 Support
Sigma Lithium’s 9.55% intraday drop underscores its precarious position amid lithium sector volatility. While sector leader Albemarle (ALB) also fell 4.93%, SGML’s weak fundamentals and overbought RSI suggest further downside risk. Traders should prioritize short-term bearish strategies, with SGML20260116P13 as a top pick for a $13.50 breakdown. Monitor the 200-day MA at $7.28 for long-term direction. If SGML stabilizes above $13.50, a rebound could test $14.24 resistance. Act now: Secure SGML20260116P13 for downside protection or watch for a bounce above $13.50.