The rare earth stocks we've been watching moved out yesterday while another round of weakness hit the oil and gas sector.
Sometimes it takes patience to let a pattern mature before it breaks out. We first started looking at rare earth stocks a few weeks ago and yesterday were rewarded for our patience with Molycorp (MCP) and Avalon (AVL) heading out. The key level to watch in Avalon is $3.00 where there has been a seller for some time. As long as the stock remains above this level I’m encouraged and will give the bulls time to take the name higher.
While I chose to avoid individual short setups yesterday such as EOG Resources (EOG), I did initiate a short position in the Oil Service ETF (OIH) which is confirming a head-and-shoulders break along with an angular trend break to the downside. With a stop at $42.20 the trade presented decent risk reward and is worth keeping on the radar.
I also chose to add to my Basic Material Double Short (SMN) yesterday as the ETF did an abrupt reversal into the afternoon and looks as if it is working on a sustained bottom. This and a bit more in this morning’s video which can be found below: