Molycorp, Inc. is a rare earth oxide producer in the Western hemisphere. Molycorp owns developed rare earth projects outside of China. The company also owns rare earth oxide and rare metal producer in Europe. Molycorp is the producer of rare earth alloys in the United States. It has three operating segments: Molycorp Mountain Pass, Molycorp Tolleson and Molycorp Sillamae. Since April of 2011, the company has acquired AS Silmet located in Sillamae, Estonia and Santoku America, Inc. In August of 2011, Molycorp opened an office in Tokyo, Japan to provide customer support, as well as consulting and technical services to its customers in Japan.
To analyze Molycorp’s stock for potential trading opportunities, please take a look at the 1-year chart of MCP (Molycorp, Inc.) below with my added notations:
Over the last (5) months, MCP has formed a strong support at $25 (navy). Starting in December of 2011, MCP has tested that $25 level on (4) different occasions. In addition, MCP has created an important level at $30 (blue) as well, both as support (October) and resistance (November – December). The stock is currently pulling back to the $25 support.
The Tale of the Tape: MCP is currently trading between its $25 and $30 price levels. A long position could be entered on a pullback to $25 or on a break above $30 with a stop placed below the level of entry. However, if you are bearish on the stock or overall market, a short trade could be made on a break below the $25 level.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT