Sunday, January 26, 2014

MCP Molycorp Weekly and Daily Charts Falling Wedges Gap

Molycorp is a rare-earth miner and very volatile and speculative. You can wake up on any given day and these stocks can be 20% higher or 20% lower. The weekly chart shows the long term beating continuing creating a price move down through the falling wedges. Positive divergence creates the base in November-December but price bumped its head up against the top rail of the wedges and failed. The circle shows where another matching low in price would likely result in positive divergence remaining so it is very likely that MCP is basing on a longer term basis moving forward.

The daily chart is in a sharp falling wedge pattern which points to the open gap at 4.8-5.0. The 50-day MA is 5.03 so bulls would like to hold this level. Stochastics and money flow are agreeable to a bounce but after the bounce the RSI and MACD wants to see another matching or lower low. The rare-earths should be in demand for many years forward so MCP should have a future even if the sector is extremely volatile. The blue lines show how price now sits on an island so in the future weeks or months price may come up to 6-ish and leap higher to 7 and above to create an island reversal, but that is likely a ways off in the distance.

Keystone opened a long position in MCP on Friday. Perhaps a bounce will occur now, just above the gap fill, and may take price to the thin upper rail of the falling wedge at 5.25-ish. The indicators are weak and bleak as mentioned above so price will likely want to come back down to fill the gap, then the 4.75-5.00 area creates a firm bottom for the weeks and months ahead. So, in an ideal world, the trade would be a bounce now to 5.25, where the trade would be exited, then MCP would not be played from the short side, then the long side can be reloaded and played again from 4.8-4.9 which should be a firm bottom. If price drops from 5, the long position can be added to at 4.8, and even 4.2 but it should not drop to that extent. The anticipation is that 4.75-ish should hold as a bottom for MCP moving forward. A nice near-term move now would be a bounce off the 50-day and for price to move up to back kiss the 20-day. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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