A Technical Look At 5 REE Producers

For those of you who are looking to get into the volatile REE market I’ve decided to write up an analysis with 5 of my favorite REE producers. You may have heard good cases from the fundamental side of these companies but in REE market which has been extremely volatile, it may be hard to find a solid entry point. I’ll do my best to suggest some opportunities.

I’m not going to discuss fundamentals because that would take up my entire night, and the point of this commentary is not to debate valuation and supply etc. This analysis is for those who know these companies already and are not intersted in more fundamental analysis on them.

Stans Energy

Stans Energy (STZYF) is a producing REE miner in Russia. I was nearly turned off to opening a long position here but Monday’s price activity has ignited a pullback that makes this stock look a lot more attractive. On Monday, there was a bearish engulfing candlestick that has wiped out all of last week’s gains and in addition, the weekly chart also has this week’s candlestick engulfing last week’s candle on very high volume. I think that this means that we may see more weakness next week and currently we are right on support ($2.00) though I don’t think that this is the bottom yet. Wait for the market to tell you to get into this, I will be keeping an eye on it and I plan to buy when I believe that it has bottomed.

Great Western Minerals

Possibly my favorite REE producer, though they have political risk in South Africa, Japan has interest in the area and Great Western Minerals (GWMGF) has to be on their radar. I’ve been providing some analysis on this company though I haven’t done much since I called the breakout before .70 – the stock has run away since then.

This is a very bullish chart for three reasons: The lower trendline is providing moving support which we are sitting on. The flat support is meeting the moving support – we’re sitting on that as well. Currently, we’ve formed a bullish flag after the break up above $1.00. This is a buy with a stop at $.95.

Lynas Corp

Similar story as GWMGF here for Lynas Corp, (LYSCF) (though not a bullish as Great Western) a star gap forms at the beginning of the year which was followed by more or less a month long consolidation period. It doesn’t appear that it can go much lower but it doesn’t appear to have much bullish momentum yet either. It did find support at the 50 day MA but volume hasn’t picked up and the oscillators particularly the stochastics aren’t showing that a breakout is coming soon. On the contrary, a decisive breakout may not occur and thought the MACD appears to be rolling over, I’d only be a buyer here with a tighter stop loss than normal as this could find resistance right at the 20 Day MA.

Ucore Rare Metals

Probably the most likely buyout candidate out of the existing juniors, Ucore Rare Metals (UURAF) looks attractive here with a nice symmetrical wedge pattern. Selling volume has been lacking and I expect the price to bounce off of that lower trendline and test resistance at $.925. Any breakout above resistance should as always be on high volume to confirm the move. If the wedge plays out, the price target could be as high as $1.15 – $1.20 as the top of the pattern is $.94, the low is $.68, and the breakout point would likely be $.90 (.94 – .68 + .90 =. $1.16). I’m a buyer here with a stop near $.75.

Molycorp

Last but not least, the celebrity of REE producers, Molycorp (MCP). A nice cup and handle has formed over the last month and a half and we are now close to trendline support. This chart is going to either break the 2+ month support trend and enter a correction, or it is going to breakout above (about) $55.50 and complete the cup and handle pattern. The price target for the breakout would be $70 ($55 – $40 + $55 = $70). I think that this cup and handle is a legitimate indicator due to the volume decrease throughout the last month of trading. That volume decrease signals that the stock is trading lower as a result of consolidation and profit taking rather than bearishness towards the fundamentals. I’m a buyer with a stop at or just below $50.

The technicals for these companies in order from best to worst are:

Great Western
Molycorp
Ucore
Stans
Lynas

Great Western has the most momentum and I like the bull flag as well as the moving support trend. The reason why I don’t think MCP is in a better position is because MCP has attracted a LOT of bears and a lot of investors don’t like the high valuation without earnings. Ucore has as solid wedge, but that’s about all it has to go on, Stans doesn’t look great yet, but it will very soon and Lynas isn’t quite showing a bull or bear bias yet but I’m certainly waiting to see how that plays out.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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