Focusing on SHZ in Rare Earth Group

For the past few months traders have had a lot of success targeting the rare earth group for cash flow trades. More recently though, rare earth stocks pulled in, but are now turning back up. Molycorp, Inc. (MCP) is the leader of the group, and when the company announced a secondary offering to fund Phase 2 expansion of its California Pass mine, it gave us an indication that the bottom for rare earth may be in place.

There are 4 stocks in this group that I trade, which are MCP, Rare Earth Resources Ltd. (REE), Avalon Rare Earth Metals Inc. (AVL) and China Shen Zhou Mining & Resources Ltd. (SHZ).

Yesterday, the rare earth stocks took off, with the exception being SHZ. The stock closed higher, but did not get the momentum of the others in the group. Today SHZ is my focus because it has the best pattern. The stock has been lagging since announcing a secondary offering a month or so ago, but It seems to have cleared resistance .

I added back above $7-$7.10 on massive volume, and my first target will be around $8 for the gap fill, at which time I will measure composure of the group and stock. I expect SHZ and other rare earths to make new highs as data has shown increasing demand for rare earth metals at a time when China is cutting exports. My stop on the trade is $6.45.

Disclosure: Long SHZ

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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1 Comment on Focusing on SHZ in Rare Earth Group

  1. Interesting. I would also take a look at Commerce Resource Corp. (TSXv: CCE / OTCQX: CMRZF). The stock has come under downward pressure as of late, which I feel presents an excellent buy opportunity. Their Eldor Project in Northern Quebec is has been posting some great results. Early indications are that is much larger and richer then Avalon (AVL), has a better physical location… but the big kicker… Commerce Resources has only 1/3 the market cap of AVL.

    Just an idea worth investigating.


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