While the major sectors take a breather, underneath the surface unique areas like rare earth and solar stocks are setting up for a run higher.
While the major averages look to consolidate their recent run, some sub-sectors are attempting to set up and look ripe for trading opportunities. Rare earths continue to interest me with Avalon (AVL) at the top of the list. I entered a position when mentioned last week with a stop below the $2.75 pivot. Clearly there was supply that came in above $3.00, and my belief is that when this seller is done, the stock will rip higher. I would add to my position on a sustained move above $3.00. Molycorp (MCP) is in a similar position with supply coming in above $31.00. A move above here would have me adding to my existing position.
Solars are also interesting to me after their moment of greatness last week. My belief is that these stocks are not one-day wonders and that follow-through after this accumulation move is coming. As is typical with a setup like this, traders often take the names off their radar as they creep higher until the break point, which has everyone tripping over themselves to buy. Trina Solar (TSL) and JinkoSolar (JKS) are at the top of my list and being already long would be adds over the key break out levels mentioned in the video below.
Long AVL, MCP, TSL, JKS
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