Weekly chart of the ETF, REMX

Rare earth stocks: Buy, sell or hold?

Whether you believe in buying high and selling higher, or in buying low and selling higher, the important point is to at least buy wholesale, not retail; especially when it comes to rare earth material stocks which supply magnets to the auto industry.

A recent article noted by the Critical Metals Report of an article by Carl Delfeld of ETF Daily News (dot com) seems to have laid it all out as far the rare earth industry goes. He states, "I believe it's time to take advantage of this sharp pullback and make a value-driven move on rare earth stocks."

At first, my question was: What changed? Then I reread his statement.

Ah, there’s the rub: ascertaining value. For the past year I, too, have received dozens of email offers explaining the value of rare earth stocks, and I should buy now rather than later. Well, good thing I never bought much, because the entire sector tanked.

Frankly, I may nibble at times on stocks with potential, but I more often prefer the stock charts to tell me when to buy. However, in the words of the legendary trader, W.D. Gann, time is more important than price. In this case, though, so is patience.

Truth is, on a fundamental basis I can agree with Mr. Delfeld on the sector; his reasoning makes sense. Then again, it is the same reasoning that all of us read in early 2011. Of course we must be concerned with China's economy, up or down; and the world is using more and more rare earth materials which defines the demand part of the equation. Then again there is the supply part of the equation, whereby China has a lot of leverage over rare earth production and prices; and the future may hold a VAT; yes a value added tax to control production inside China. That information, though, came from Mineweb.

According to Delfeld, China still produces 90% and controls 95% of the export market for the 17 metals considered rare earths.


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