Lynas Rare Earths (LYC) is the largest producer of rare earths outside China. Michael says the market has been concerned about the commissioning of a new processing plant in Kalgoorlie as a replacement for their Malaysian plant. As a result, the past few months has seen its share price fall from the high $9’s to the low $6’s.
“However, the share price chart is now indicating to me that the declines are overdone and the share price is ready to climb a wall of worry,” Michael said.
“After falling sharply in the past few months, we can see Lynas Rare Earths then spent the past few weeks forming a small base by trading sideways near $6.50.
“It made a false break to the downside on 6 April before rallying higher again.
“A false break is when a stock looks to have fallen under a support level, only for it to be quickly bought up.
“It is a result of panicked investors giving up on the stock too late in a downtrend while the smart money moves in to take advantage of that liquidity.
“This week it popped out to the upside of the base.
“We also have buy signals on the Moving average convergence/divergence (MACD) and Relative Strength Index (RSI) (circled).
“All this price action looks very bullish and I expect a recovery here,” Michael said.
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