This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Rare-Earth Stocks Ride Again

Stocks in this article: REE SHZ MCP

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.

REMX Daily
Source: eSignal

The Market Vectors Rare Earth Strategic Metals ETF came public near $20 on Oct. 28, trading over 2 million shares and then settling into average daily volume closer to 200,000 shares. It ground sideways in a tight range between $19 and $22, finally lifting out of congestion on Dec. 28, when it spiked to over 1 million shares.

Trading activity percolated through the fund in the next five sessions, hitting 1 to 2 million shares each day, with price finally topping out at $27.19 on Jan. 4. It rolled over and dropped back to $22 just four days later, where the fund chopped sideways for over three weeks. It lifted out of the trading range last week and has now retraced 62% of the prior downswing.

Buying interest has been steady off the low, but the fund isn't attracting the speculative fervor we saw in late December. As a result, I expect that momentum players hoping for a V-shaped rally back to the January high over $27 will be disappointed as this instrument drops into a broader consolidation pattern that eventually looks like a triangle or rectangle.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs