Update – Ucore, Molycorp, Great Western

Another quick update on these rare earth producers. Some are starting to look attractive, some are trading as expected, while one has been unpredictable.

So far I’ve been the most accurate with Ucore. I said not to chase this one and today a large bearish engulfing candle indicates that there has been some profit taking. Don’t go after this, let it come back to you. Support is around $.90 – $.95.

MCP closed below the 50 Day MA on high volume. I think that this thing is a little oversold but a close below the 50 means that it isn’t likely to make a robust reversal anytime soon. If you’re unsure and looking for exposure, try opening half of a position that way you can lock in this price now and add later if it falls. Regardless, I think that this one’s going to go lower.

As opposed to Lynas, Molycorp, Stans, and Ucore, Great Western has been everything but predictable. GWMGF appeared to be in a great bullish setup and ready to make a run at $1.25 but that broke down and the stock has been thrashed 9 out of the last 11 trading sessions. It’s beginning to feel like someone has been shorting this stock because it has been oversold for days even though you could argue that it had been due for a pullback. Yesterday, I would have told you that this is a screaming buy based on the fundamentals and the recent range, but after today’s action I think it can go lower. I strongly believe that the market is extremely off on this one and they simply do not understand the fundamentals of this sector and particularly this stock. Support is at $.71 and $.55.

The Chinese reserve hike definitely had a hand in today’s price action. This sector is heavily reliant on news out of China in order for Wall st. to trust it from the buy side and any negative news can induce a sharp selloff as evidenced by how REE’s were generally down across the board. I expect to see some more weakness and consolidation in this sector until we receive some more bullish news – as that’s what investors need in this market to become bullish.

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

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