Aaron Basile's  Instablog

Aaron Basile
Send Message
Contrarian Investor, Commodities Speculator, Technical Trader.
My blog:
Aaron Basile
  • Rare Earth Stocks Close To Potential Breakout 1 comment
    Mar 29, 2011 10:02 PM | about stocks: IQ, AVL, REE

    Rare earth producers have consolidated for nearly 3 months after the sharp, but brief buying frenzy that took place at the very beginning of this year after the Chinese announced that they would cut export quotas for the year of 2011. Since then, China has continued to indicate that they not only will cut export quotas but they will also increase import quotas. Regardless, rare earths stocks have been subdued including the flagship rare earth company Molycorp who have yet to make new highs this year even after their monster earnings report a few weeks ago.

    Based on the technical activity and the Chinese import/export situation, it looks as if rare earth producers could be breaking out to new highs in the not too distant future.

    Several technical indicators show that Molycorp is close to a bullish breakout above the previous resistance level of $62.50. First I see a test of resistance resulting in a temporary double top followed by a pullback to $55 or slightly lower, then a more controlled test and ultimately a breakout to new highs.

    We have been overbought for a week or so and have broken through 2 resistance levels already. Today MCP gapped above resistance which tells me that the real sellers aren’t shorting this stock until it inches closer to resistance. I would be a seller at $62 as MCP is hitting an RSI peak, resistance on the MACD, and has already been overbought leading up to today. I would advise a strong buy at $55. The 20, 26, and 50 MA’s are bullishly crossing over and moving higher, the volume is certainly behind this move and there is strong support at $55. The 20 and 26 MA will provide added support as price activity consolidates after hit a ceiling at $62.

    MCP is leading the charge in the rare earths sector and other leading rare earths producers are showing the same chart patterns despite not yet having the cash flows that Molycorp does. I think that we hit a short term top here followed by the next leg up.

    Many of the rare earth juniors had a huge run at the end of last year but most have consolidated YTD even though there was plenty of reasons to be bullish based on the news reports regarding the sector. They’ve been stuck in a trading range for too long and the train will be leaving the station very shortly.

    Take a look at how they’re performing:

    Triple top coming up shortly for Lynas, but strong MA support will be there for buyers to come back into.

    …And for Stans Energy – an extended and boring consolidation period after a monster run backed by a clear decrease in trading volume.

    You can call the chart in Great Western a potential triple bottom or an inverse head and shoulders reversal. Again, textbook volume decreased during this consolidation as is the case with Stans Energy.

    Stocks: IQ, AVL, REE
Back To Aaron Basile's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • Aaron Basile
    , contributor
    Comments (92) | Send Message
    Author’s reply » www.businesswire.com/n...


    March 30, 2011 08:00 AM Eastern Daylight Time


    Molycorp and DOE's Ames Laboratory Sign Cooperative Research and Development Agreement on Rare Earth Magnets


    GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Molycorp, Inc. (NYSE: MCP), the Western hemisphere’s only producer of rare earth oxides, today announced that it has entered into a cooperative research and development agreement with the U.S. Department of Energy’s Ames Laboratory. The Molycorp-Ames effort will focus on developing new methods to create commercial-grade rare earth permanent magnets.


    The collaboration combines Ames Laboratory’s 60+ years of experience in the critical materials science field with Molycorp’s 58+ years of experience in developing and commercializing innovative rare earth processing technologies.


    "We are looking forward to a highly successful partnership between Molycorp and the Ames Laboratory that will incorporate new techniques, processes, and materials into U.S. supply chains," said Debra Covey, Ames Laboratory associate laboratory director for Sponsored Research Administration.


    “This is a significant first step toward a long and mutually beneficial relationship between these two committed entities," said Karl Gschneidner Jr., who will lead the research efforts at Ames Laboratory. "The Ames-Molycorp partnership will serve to re-energize applied rare earth research in the U.S., and will begin to ameliorate the current void in intellectual infrastructure in rare earths by training undergraduates, graduate, and post-doctoral students and providing them with research opportunities.”


    Ames Laboratory scientists will investigate several compositions of rare earth materials and processing techniques with the goal of making permanent rare earth magnets with properties comparable to currently available neodymium-iron-boron magnets. The material combinations studied will correspond with the relative concentrations of rare earth elements in Molycorp’s Mountain Pass mine, using techniques that are more cost effective and leave a smaller environmental footprint than current methods.


    “For more than 60 years, the Ames Laboratory has sought out solutions to energy-related questions through groundbreaking research and development,” said Dr. John L. Burba, Executive Vice President and Chief Technology Officer of Molycorp, Inc. “It is my hope that this cooperative agreement will lead to breakthroughs in rare earth material manufacture that can advance the state of the art in rare earth magnet design and manufacture as well as strengthen our nation’s productive capacity of these and other critical rare earth materials.”


    Gschneidner, Vitalij Pecharsky, Ames Laboratory Senior Scientist, and Dr. Burba will serve as principle investigators on the project.
    30 Mar 2011, 01:55 PM Reply Like
Full index of posts »
Latest Followers


  • UUP Jun 11 $22 up 50%
    May 23, 2011
  • AG - much needed reversal
    Apr 6, 2011
  • MCPIQ continues breakout on Chinese quota cut!
    Mar 25, 2011
More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.