Molycorp Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rare earths miner Molycorp (NYSE: MCP  ) shot up as much as 12% in intraday trading on heavier-than-average volume.

So what: When it comes to prices for rare earth metals, the math is simple for Molycorp: Higher prices mean a brighter outlook. So there should be little surprise that investors are getting excited about the stock after Reuters reported that a tonne of rare earths now goes for more than $100,000. While that may sound like a pretty penny on its own, consider that the price is up from $14,405 per tonne last July. Rare Element Resources (NYSE: REE  ) and Avalon Rare Metals (NYSE: AVL  ) were also both up sharply on the news, while the Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX  ) posted a more modest gain.

Now what: There was perhaps a trace of egg on Jim Cramer's face as he was in the headlines yesterday for reiterating a "sell" call on Molycorp. But frankly, I can't help but agree with him. Molycorp has been on a monumental tear since its July 2010 IPO and now trades at more than triple its IPO price. Rare earths are a hot commodity right now, but as many great investors have noted, the time to buy a stock is generally when nobody's talking about it or the outlook appears bleak, not when investors are excited and brimming with confidence.

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