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MCP about to breakout? It's just a trade...

|Includes: iQIYI, Inc (IQ)

Ah, the rare earth trade. And yes, I said trade. Everyone seems to love these stocks, but are they really meant for long term investments. Not quite yet. Shares of Molycorp are up over 4% today, getting back to the $58-$59 area where it has run into trouble the past few weeks. Just take a look at the 3-month chart. After that fall in late July and early August, we have bounced back a few times only to get stuck where we currently are.

This company mines those rare-earth minerals that seem to be in extremely limited supply, or is it extremely great supply? I really don't know. Depends who you listen to. If these minerals are as scarce as some make them out to be, this $5 billion company could be a good long term growth story. You can see here how the earnings appear to be skyrocketing. But I'm not a believer, not yet.

Molycorp, like all others in this space, is a good trading instrument for now, not a long term investment. Looking at that 3-month chart again, I can see at least a dozen opportunities of 10% moves in short time periods. This stock could breakout soon on its rise back to it's 52-week high near $80, but for now, you are much better off playing it $5 at a time rather than trying to get $20 in one move.