Rare Earth Stocks Show First Signs of Relative Weakness

 

Today was a very interesting day for the rare earth stocks, mainly because it marked the first real bout of relative weakness we’ve seen in weeks. After a strong run higher, I think it’s important to walk through today’s action and talk about what it may be signaling going forward.

On the left above, I’m looking at a 5-minute chart of REMX, the ETF that tracks the rare earth space. In the lower pane is the SPY for comparison. Right from the open, at point A, we got our first clue that something was different. The SPY rallied straight out of the gate, yet REMX was selling off. When the broad market is pushing higher and a leading group can’t participate, that immediately gets my attention. That divergence is often the earliest sign that sellers are becoming more active.

At point B, the relative weakness became much more obvious. While the SPY was making new highs, REMX was only able to put in a much lower high. That’s a textbook example of relative weakness. It shows that buyers are no longer willing to chase price in this group, even as the overall market remains supportive.

Once short-term support was broken, selling picked up and continued pretty much into the close. There was no meaningful attempt to reclaim those levels, which tells me this move wasn’t just random noise.

Looking at the daily chart of REMX on the right, volume really stands out. Turnover was heavy, suggesting this was more than just light profit-taking. At the same time, the group was a bit overextended after its recent advance, so a pullback here shouldn’t come as a surprise. Strong trends often need time to reset.

Several individual names in the space felt the pressure today, including CRML, METC, TMC, and MP. In the longer term, I still think these stocks look constructive. Today’s action doesn’t change the bigger picture for me, but it does suggest that near-term, it’s probably pullback time.

If we do see continued weakness, I’ll be looking at that pullback as a potential opportunity rather than a reason to abandon the trade. I’ll be watching for support to form and for relative strength to reappear, with the goal of getting long again in the days ahead.

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