Rare Earth Element Stocks – Stick With The Leaders AVL (TSX) And RES (TSX-Venture)

by Olivier on July 21, 2009

In the past I’ve written about sticking to the leader and avoiding area plays. This posting is not about area plays but it is more or less the same rationale I am applying. I am watching lots of different stocks and sectors and my trading philosophy really comes down to betting on the leaders. These are the best stocks with the highest market cap, the highest visibility in the market place and no overhead resistance. Keep in mind these are small cap stocks. Most people would probably classify them as micro cap stocks.

AVL.TO – Avalon Rare Metals and RES.V – Rare Element Resources offer all the characteristics I am looking for. Their market cap is less than 200 Million CAD$ for AVL.TO and less than 100 Mio CAD$ for RES.V. Nothing wrong with trading stocks with even smaller market caps. But with rare exceptions these are not the stocks the big money is going to flow into. At least not at this point in time of the game. That’s why I stick to the leaders. Odds are high they will be the better performers.

If the Rare Earth Sector is going to develop into a full blown bull market holding those two will make you lots of money. So for now I am not interested in buying all those illiquid 5 Million CAD$ market cap stocks popping up left and right. Instead I will concentrate on adding more to my AVL.TO and RES.V positions. I consider both to be the leaders in the Rare Earth Realm.

There are two stocks those who have access to German and Australian stock exchanges probably are well aware of. Lynas and Arafura Resources. Lynas is one of the most advanced Rare Earth plays. Then again if you compare the Avalon Rare Metals, Rare Element Resources, Lynas and Arafura charts priced in Euro RES.V and AVL.TO from a technical perspective are the go to stocks. RES.V is trading at an ATH in Euros and AVL.TO is trading near its 52 week high in Euros. Make sure to go with the stocks with the least amount of overhead resistance. This gives you clear sky potential stocks which have a high potential for huge price moves. That said at some point in time in the future Lynas and Arafura might offer decent trading opportunities.

Compare the various Rare Earth stocks’ performance:

My public list with all my charts can be viewed here:

Have a great evening!

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