Chart Glance: MCP passed a major downtrend channel and after confirming a higher-low double bottom, we believe the slowdown in rare earth metals due to the Chinese New Year has finally bottomed. It appears this could be a complex inverted head and shoulders pattern.
50 DMA- $27.67 100 DMA- $30.85 200 DMA- 41.78
Support 1: $24.5 Support 2: $23.05 Support 3: $20.8
Reasons: MCP got flushed from $29-$24 on better than expected earnings. In my opinion, the only negative was their earnings power was going to be in Q1 2013 instead of Q4 2012. As of February 15th, MCP float was 56.9 Million shares, 18.3 Million reported short shares. Any positive news flow and the shorts could be in real trouble. MCP options are extremely liquid as we saw a customer bought 1700 Mar 27 weekly Calls. Implied Vol was up 3% to $54. Also, Morgan Stanley reaffirmed its “overweight” rating on MCP. With MCP near its 52-week lows, and MCP is projecting to increase revenues at more than 50% this year and more than 75% in 2013. Finally, In my opinion, I would start building a position at these levels. I would use hedge-income strategies and start selling a portion of your long position prior to the next earnings report.