Looking at Rare Earth Metals

March 14, 2022No Comments

Hello, and welcome to the Smart Money Dumb Money show. I am your host, Keith Richards as always. I am president and chief portfolio manager of ValueTrend Wealth Management, and I’m also a technical analyst. And in fact, I’ve been in the business for 32 years now and many of those years, since literally the mid-1990s, I had been involved with technical analysis. So this show is always focusing on the charts. We’re going to be looking at the technicals. And today I want to talk about something a little different. It will be on the subject of rare earth metals. And I want to talk about rare earth metals for two reasons. The number one reason is that there’s a war going on. And I think most of us are aware of what’s happening in Ukraine. It’s just unbelievable how these totalitarian governments like Russia will just move in on a country.

 

And we’ve seen China do this as well in Tibet many years ago and there’s threats against Taiwan. So it’s just one of those horrible things that we see happen in life and on the market. And I, you’d always hope that that era was behind us, but it’s not. And unfortunately, it’s not just bad for obviously the human beings that are involved in this conflict and the deaths and the suffering that occur, but also to world commodity prices and issues like the banks and inflation and all kinds of supply issues. Things like that, that affect all of us. So it’s really something that we need to pay attention to. And the rare earth metals are one of those things that we’re going to be seeing possibly more demand for. Now, why? One reason is because there’s some products that come out of Russia and Ukraine, and that’s going to be constrained because of the limits that will be put on Russian trade going forward.

 

And number two is the search for alternative energy sources now that Russia, and unfortunately Ukraine, will be likely cut off of exporting many of their products, such as Russia and their natural gas, as well as some of these rare earth products that come out of Ukraine and whatnot. So I wanted to talk about the charts of some of these rare earth metals, and they are most certainly are used in the development of fuel cells and nuclear energy production, things like that. So this is all really on the forefront of what’s already been a trend, but maybe an accelerated trend going forward. Now you’ll see me on occasion looking down because it’s a subject that I’m not super well versed in. So I did some research and I really wanted to find out what each of these metals does.

And there’s no one application from these metals. So when you hear me say, well, here’s palladium, and here’s what it’s used for. It’s probably just one or two of the uses I will mention of a list of 10 or 20 different things that that commodity is actually used for, but I’m going to just kind of highlight the major uses, especially those that affect day to day energy use. So let’s get started. I’m going to share the chart and we’ll go right into platinum. Now, platinum is, this is the commodity itself, the continuous contract. And you can see it did a double bottom formation, a neckline, and it appears to be just on the verge of breaking out right now. That’s very bullish. You can see the moving averages look to be crossing over. So platinum has a pretty darn good-looking chart right now, and it most certainly does interest me. So I’m going to now take a look at PLG and you’ll have to pardon me, oops.

As I manually type things in here because I didn’t set up the usual roll-through list. It just was too cumbersome. It kept putting them out of order for me. So I decided to just type in the stocks manually. So this is a platinum metals limited company. And obviously, it does not resemble the chart of platinum. So this brings up a point and that is that if you want to play platinum, you don’t necessarily just buy any producer because they don’t necessarily look the same as the chart itself. So let’s take a look at a company that actually does look like the platinum stock, and that’s IMPUY. And this is an African company that mines platinum, and you can see that it does look a lot, there’s the double bottom and the breakout.

Now, it stretched ahead of the commodity price, but you can see that it does have that look that we like in a chart. Now it’s recently hit resistance and it’s falling from there. Now in our aggressive platform, the ValueTrend Aggressive Platform, we played this. We bought on this breakout and we targeted the old high as a trading point. We just recently sold it right here. Now this stock could go through the old highs. We trade in the aggressive platform for short moves. If you go under our website and you look up performance and look at the ValueTrend Aggressive Platform, you will see that it’s done quite well, but we’re here for a good time, not a long time in many of the positions that we take in that strategy and we have specific targets and that happens to be a target.

It does not imply that platinum can’t go further so, and this stock can’t go further so FYI. Let’s take a look at palladium now. Now the most we traded this particular stock, so I’m going to type it in SBSW is the ticker, and let’s take a look. Alright, so Stillwater is a company that mines for and tries to produce palladium. And I’m looking down because I want to tell you what they do. The palladium is used in fuel cells again meaning these batteries that are being used for the EV purposes, as well as catalytic converters. So a lot of uses in the automotive business. So transportation and energy, big reason to look at palladium, and you can see that the old highs are being, they were challenged.

Now, when we traded this, we did, once again, we did a similar thing to the last stock, the African stock that you just saw, we bought it in a breakout, we sold right here, right around here. Now, it moved a little bit higher after we sold, and then it looks like it’s back down. It could, in fact, it’s holding that old breakout point, which is around, let’s call it $19, $18. And if it manages to hold that level and go higher than it would be extremely bullish. We just traded it within the aggressive platform. And as I explained a minute ago, we just do shorter term trades in that platform. We made our money, we left, but this is not a bad looking chart. And again, if you believe that this kind of commodity will be used more and more, especially with what is happening in world politics these days, then this is a reasonable place to look in palladium.

So now we’re going to look at uranium. And this was one of the first trades that I got into. This is the Sprott Uranium commodity, and it’s physical uranium. And you can see that uranium itself, according to the Sprott ETF has broken out and exceedingly bullish look to this chart. So why, because of course this is an alternate energy. This is the fuel source for nuclear plants and all that sort of stuff. And of course, that’s a very important alternate energy these days, nuclear energy. So that’s the ETF, and you can certainly play that. Now very volatile, okay. And let’s take a look though at some other ways to play it such as URA. Some trouble here. URA, sounds good, update. Alright, not quite as high, hasn’t broken through like the actual price of palladium. So perhaps there is some catch up. Now, this is an ETF that holds a number of different producers in the uranium space. And in fact URNM is one such vehicle. This is a mining ETF, and you can see that it is also struggling to get through its old highs, but given that the physical uranium has broken through it may just be that you will see that these ETFs that hold the individual stocks may break through sooner. Okay. Now another one I want to talk about is not a rare earth metal, but it is a metal that is used quite extensively in these lithium batteries. And that is nickel. Now, not such rare earth but somebody mentioned on an article I read just today that if you actually own a nickel, a 5 cent nickel that you’ll keep in your wallet or purse, that nickel is actually worth 12 and a half cents US dollars or US currency. So you know, you could actually effectively say that your nickel is worth about 150% more than what you can buy something with.

So they mentioned in the article that if the authorities catch you melting down your nickels and trying to sell it for the nickel, you’ll be fined and who knows what. But interesting thought that a nickel is worth much more than a nickel right now. This is the chart. You can see it’s broken out. It’s just gone parabolic. Again, the use of fuel cells. It’s apparently 30% of lithium batteries, is one-third is the stuff I’ve read of lithium battery is made a made out of nickel parts. So that is one thing to keep in mind if you are interested in that space. Now, finally, if you just can’t decide what to buy within the rare earth metals, you can always buy a rare earth metal ETF. And this is just one of them.

This is the REMX shares and Vector Rare Earth ETF. And you can see it’s trading sideways, but that’s a lot better than what the stock market’s doing, isn’t it? The stock market is most certainly not trading sideways, it’s going down. And so this is again probably a diversified way of playing many of these metals we just talked about along with some of the ones that we didn’t talk about, I am going to pull out my cheat sheets, such as Tungsten, which is used in electronics and catalytic converters. Cobalt, which is used in airbags and actually in paint. Again, a lot of this is related to the transportation industry and lithium. And lithium is actually a manmade metal, as I found out in my research, by putting together other rare earth. So if you want to own the whole kit and caboodle, you can look at something like this, and there are quite a few rare earth ETFs out there that you could look at.

So there’s my new exploration of rare earth metals. As you have seen, I traded a few of them in the past. I don’t really hold any right now because I was trading for short-term moves, but it’s an interesting space. And I would not be surprised if some of these metals that we just looked at that were coming into existence right now will break out. I can’t say they will until they do, but it’s an interesting play. And it’s one that you might want to take a look at as a diversification for your portfolio. If you believe in the longer-term green movement towards electronic vehicles and power plants, such as nuclear and wind power and all that stuff, all of these new investments in the new energy systems are going to involve some amounts of the metals that we just talked about. So thanks very much for watching, and I hope that was of some interest to you.

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