Technical Update For MCP/STZYF

For this post I just want to do a technical update from last week on two of the five rare earths producers. Out of the five listed, these two have been the most volatile and Molycorp in particular appears to have traded out of the trend I that I had originally suggested it would.

Last Thursday I wrote:

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 trendline that I drew on the chart from last week broke down on friday with record volume behind it. Obviously I didn’t expect that to happen though I listed a correction as a possibility but now that it has broken down, support appears to be at $45 and $40 with overhead resistance still at $55.

I also said:

I’m a buyer with a stop at or just below $50.

Luckily MCP opened below $50 on friday so personally I did not go long. The 13 and 26 Day MA’s are both trending lower and are currently above price activity so I think that there’s a good chance that this thing will go lower and I’m not a buyer yet.

Stans made an unexpected move on friday in which it closed up 14% and stopped a bearish engulfing candle for the week. However today’s candle engulfed friday’s as STZYF closed down over 13%. This is just a continuation signal and a sign that my analysis on thursday was not at all wrong, it was just that I didn’t expect as big of a bounce as we saw on friday. We’re sitting right on monthly support but with today’s price action I don’t think it will hold and I’m certain that this stock will be cheaper this week.

I’m keeping and eye out for buy signals on these two stocks but it appears that they are poised to move lower for now.

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

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