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The Perfect Level: Rare Earth Alert



January 21, 2011 – Comments (0)

The mineral trade has been one for the ages. Stocks like Molycorp, Inc. (NYSE:MCP) doubled in value in the month of December, soaring to an all time high of $62.80. Rare earth metals and minerals were the place to be as rumors surfaced out of China that they may lower the amount allowed for export. A rocket ship move was an understatement for stocks like MCP and Rare Element Resources Ltd. (AMEX:REE). In addition, small cap China mineral plays soared, moving hundreds of percentage points. China Shen Zhou Mining & Resources Inc. (AMEX:SHZ), China GengSheng Minerals, Inc. (AMEX:CHGS) and Qiao Xing Universal Resources, Inc. (NASDAQ:XING), just to name a few.
These stocks topped out at the end of December and have since sold sharply. MCP has fallen from its high of $62.80 to a low today of $44.74. This massive drop may seem like a real buying opportunity but a true investors and trader must use the charts. The charts allow for exact entries and exits. This maximizes profits. Let's analyze MCP to discover the ideal entry.

The chart of MCP is getting attractive from the buy side but has yet to hit the key support that a true investor would want to see. That price is clearly the $39.50 to $40.00 level. Why? There are two technical levels at that same price. These two signals confirm a major support and a huge bounce opportunity. First, the daily 50 moving average sits at $40.00. In addition, the last pivot high was made in late October at $40.00 as well. These two major levels coincide and signal a buy. Note the chart below.

Gareth Soloway

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