China’s about to “flip the switch” on rare earths, a series of elements crucial to handheld electronic devices, banning their export to America’s top tech firms.
U.S. tech investors are preparing for the worst.
Traders, however, are preparing to get paid.
Because with great uncertainty can often come great opportunity, and right now, there’s no better example of that than the VanEck Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX).
Up until a few days ago, it was a thinly traded ETF focused on the now suddenly popular rare earths.
It’s already gained interest from speculators waiting for a ban from China. And if they do cut off access to their rare earths supply, REMX would certainly skyrocket.
But even without a full-on Chinese blockade, there’s still ample opportunity for traders seeking to take advantage of a once overlooked ETF’s eventual upswing.
From a longer-term view with monthly candlesticks, you can plainly see that REMX is in the process of setting a higher low and establishing a new support level above the 2016 low. It’s been an up-and-down journey over the last three years, and another “leg up” could be in the works – due in equal parts to the Chinese trade drama and ordinary price action, independent of current events.
But when we zoom the chart in and take a look at the weekly candlesticks, we can see how REMX paints us an even prettier picture – something we might have missed if we just focused on a daily candlestick chart.
From December 2018 to early May of 2019, you can see how REMX set a picturesque double bottom – a universal sign of a trend reversal. Over the last two weeks, new interest in rare earths have drawn investors to this particular ETF, but there’s still plenty of room for it to run.
Should REMX clear resistance at $16.54 (set back in February) by a little under half a percent (to a price of $16.60), we might have a true breakout scenario on our hands.
And if China ends up activating the rare earths ban?
REMX could shoot the moon, running up to and possibly exceeding the 2018 high of almost $33.00.
Even if China eases off the trigger and lets rare earths leave the Far East, though, this could still end up developing into a great trade – targeting a newly formed uptrend in what appears to be an oversold ETF.
The only issue here is that because these formations are developing on the monthly and weekly candlestick charts, short-term traders might not have the stomach for the “longer than usual” trade that’s awaiting us.
Still, though, it could be one heck of a ride, and something that many investors are sleeping on despite the recent news.
It’s an opportunity that’s screaming “buy me!” from the top of its lungs. The problem is, nobody’s listening.
At least, not yet.
