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Option Traders Time MP Materials (MP) Breakout Perfectly

by | Feb 19, 2021

MP Materials (MP) shares have risen more than 40% in just over a week since featuring the new name in a bullish write-up after size call buying.

Here was the write-up:

MP Materials (MP) with a large trade on 2/8 as 5000 March $30 calls were bought to open for around $3.5M, a name with 5000 short March $45 calls opened on 12/22 in open interest and 1200 June $35 short puts from a trade 12/11. MP shares surged in December and now are forming a nice consolidation pattern with the next push above $34 likely to cause a move to new highs around $45. MP owns and operates the Mountain Pass facility, one of the world’s largest integrated rare earth mining and processing facilities and the only major rare earths resource in the Western Hemisphere. MPMO acquired the Mountain Pass mine and the rare earth processing and separation facilities located at the mine out of bankruptcy in July 2017. In the five years prior to the acquisition, the prior owner of Mountain Pass, Molycorp, Inc., invested over $1.7 billion of capital in the Mountain Pass mine, primarily in constructing rare earth processing and separation facilities on the Mountain Pass mine site. Rare earths, a group of 17 metals, are increasingly regarded as an urgent matter of national security given their crucial role in the manufacturing of high-tech products, from weapons to magnets for electric vehicles. While the US used to be a major global producer of the metals, China now dwarfs the US in rare earths production, and is the source of 80% of US rare earth imports. With China declaring rare earths a “strategic resource” and recently tightening regulations on the metals, the US faces heightened pressure to secure its supplies. The military coup in Myanmar, which accounts for roughly 10% of global rare earths production, temporarily sent shares of Chinese rare earth companies surging, driven by fears that instability and US sanctions could disrupt exports. MP currently has a market cap of $5.55B and revenues seen rising 88.6% in 2021 and 35% in 2022, also EBITDA positive with 78% and 79% growth seen for 2021 and 2022. USA Rare Earth is another play set to explore a listing this year at a $1B valuation. MP expects to separate rare earth oxide production in 2022 and NdPr magnet production expected 2025 at the soonest. NdPr magnets are found in more than 90% of EV motors and magnets for electric powertrains are expected to grow 15x in the next decade. The $710M 2020 market is seen reaching $10.7B in 2030. On 12/3 Northland started shares Outperform with a $25 target seeing a supply squeeze and Deutsche Bank at Buy with a $25 target for exposure to ex-China rare earth supply.”

Once again, combining options flow with technicals and a fundamental outlook can lead to massive gains in short time periods.