Molycorp Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rare earth element miner Molycorp (NYS: MCP) are up 16% today after a Pentagon report was released.

So what: The Pentagon released a report to Congress highlighting the military's critical dependence on rare earth metals, most of which come from China. The military as well as industry's reliance on rare earth elements and metals have driven the price of these products sky high along with Molycorp's stock price in the last year.

Now what: The report isn't exactly breaking any new ground so I'm a little baffled by the reaction. Recently the prices for rare earth elements have started to fall after Lynas Corporation opened production on a new rare earth facility. When Molycorp opens its facility next year it is likely the price pressure will continue.

I see this as a great selling opportunity because supply in this market is only going to increase, meaning the profits projected based on current prices likely won't come to fruition.

Interested in more info on Molycorp? Add it to your watchlist byclicking here.

At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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