Rare-earth stocks caught fire in the second half of 2010, with many components going vertical after momentum players piled into the speculative sector in force. The group topped out when the calendar flipped into January and spent several weeks shaking out overzealous bulls. The most popular names hit intermediate support late in the month and have now turned higher.
Real demand drove the rally's first leg, in a natural reaction to Chinese domination of active rare-earth mines. But the second leg, which took place in late December, raises a red flag, because the thinly traded Market Vectors Rare Earth Strategic Metals ETF (REMX) may have triggered an unnatural buying panic over the Christmas holiday and lifted components into parabolic spikes.
If the derivative tail was wagging the rare-earth dog on that second rally, the sector could now have a tough time finding enough committed buyers to get back to the 2010 highs, unless China helps out with a brand-new embargo. Barring that event, market players will need to focus squarely on the technicals, looking for clues about the future of this unique group.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV