Why Molycorp's Shares Popped

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 Molycorp (NYSE: MCP  ) jumped 10% on speculation that rare-earth prices will rise due to Chinese action.

So what: China said it had just 23% of the world's rare-earth minerals, lower than the 36% the U.S. had estimated. Uncertainty about the level of rare-earth exports in the face of falling prices pushed the stock higher today.

Now what: There isn't any evidence yet that prices will go up due to any action out of China. In fact, prices have fallen dramatically over the past few quarters according to Lynas' published rare-earth prices. Increased supply has put a lot of pressure on prices and will continue to as Lynas and Molycorp increase production. I'm definitely not buying the jump today.

Interested in more info on Molycorp? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (2) | Recommend This Article (1)

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  • Report this Comment On June 20, 2012, at 3:46 PM, harkvasa wrote:

    MCP shares went up almost 10% on 3 times the normal volume today. On 56 Million shared float of MCP, approx 24 million shares are short now. I think, with rare earth prices stabilizing, and with MCP earnings growth, a panic short covering could take place and MCP could rise to high 20s price range ( $25 to $30) in the next 3 months.

  • Report this Comment On June 20, 2012, at 5:37 PM, foolsmstr wrote:

    I wonder if Motley Fool has in-house portfolio managers that monitor the articles being published by their "analysts", then take the opposite trade of that suggestion. And build a statistical performance database?

    But I feel I owe Fool some thank-yous because I have been doing the exact opposite of your ideas and -- I am way ahead.

    I am doing the same thing for MolyCorp.

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