Is the Rare Earth Bubble ready to Pop?
by Raghu Gullapalli – SmartStops.net contributor
Symbols mentioned: MCP, SLV, GLD
The weakening dollar has helped erase some of last week’s weakness in commodities.
Silver lost nearly 30% and Gold 10% of their respective values . Leading many experts to believe the commodity bubble has popped. But after a rather tumultuous week, the precious metals have started their upward trend again. Many could argue that the Gold bubble has been building for nearly 10 years now and that silver’s explosive recent growth was a result of the high cost of gold and the strong industrial implications of the metal.
This leads us to ask if the bubble includes all commodities. The rare earths sector has seen incredible growth over the past year. Molycorp (MCP), which has earnings after the close today has gone from $15 to as high $79 all in the past year. Many investors are no doubt wary of entering such an extended and possibly overbought company. Especially given the drubbing many people took with Silver (SLV) in the past week. Its good to be cautious but try not to let your fear over ride your ability to make sound judgments. MCP has had several strong run ups over the past year and then pulled back, allowing the stock to rest before its next surge up. If you take into account the measured move it could possibly rise another $20 in the next surge.
If you keep yourself protected, you can always take on higher risk stocks. Now that MCP has enough history, SmartStops has added it and so you can get a daily adjusting exit strategy. Smartstops.net has the short-term stop for MCP at $62.45 and the long-term stop at $57.58. Make sure to always keep your exit strategy in play even if you aren’t yet ready to set proactive stops. Use the real-time risk alert if the SmartStop is triggered to then determine your next step.