The Rare Earth Rebound Just Became Real. Here's the Best Way to Play. (AVL, REE, MCP)

Back on September 24th I pointed out how Avalon Rare Metals Inc. (NYSEMKT:AVL) was a superior stock pick to Rare Element Resources Ltd (NYSEMKT:REE), even if only for short-term technical reasons. Either way, however, the rebound in the prices of most rare earth metals was going to be good for both REE and AVL. The one name conspicuously missing from the bunch, of course, was Molycorp Inc. (NYSE:MCP). Well, you can finally add MCP to the buy list as well. In fact, the different path it took to technical soundness may well make Molycorp the best pick of the bunch right now.

Just for the sake of follow-up, Avalon Rare Metals shares never took off the way I expected them to a few days ago. They're still in the hunt, mind you, but the 200-day moving average line is still more than a small impasse. The horizontal ceiling around $0.96 has been hurdled for a second time as of today, however, and with volume starting to swell on the way up again, AVL is still a name you'll want to keep on your watchlist.

Ironically, given the time that's passed between my last comparison of Avalon and Rare Element Resources Ltd, REE has actually had a chance to become the better bet between the two now... though only by the virtue of the pullback I was worried about back on the 24th. The stock's fallen back from $3.31 then to a low of $2.5 a couple of days ago (a pullback that started the very next day after my warning, just so you know), but the 20-day moving average line has since stepped in as support, and the bulls are using that line in the sand to rebuild a technical foundation from which to launch the next rally.

In the meantime, while Rare Element Resources Ltd and Avalon Rare Metals have been regrouping, Molycorp Inc. has managed to make its way to the top of the buy list.

Just for the record, MCP is still apt to be just as wobbly as it and its peers have been of late. That's a short-term headache, however. When you take a step back and look at the bigger picture chart of Molycorp, what you see is a well-organized technical turnaround framed by a new string of higher lows as part of a wedge pattern, and a breakout confirmed by a combination of crossed above that wedge's upper edge along with crossed above the stock's key moving average lines.

Although today's opening bullish gap from the stock will likely prove to be a drag going forward, the heavy lifting has already been done - that dip would actually be a buying opportunity.

And in many ways the prolonged effort needed for MCP to turn around when other names like AVL and REE did it so quickly makes some sense. While all rare earth metal miners have assets, Molycorp is the proverbial grandfather of them all in terms of age as well as in terms of the size of its source at Mountain Pass. It should take the longest to reverse course. That's not a bad thing, though. In fact, it's a very good thing for all the rare metal stocks. Since MCP is likely to be the best barometer for the rare earth business, the fact that it's finally turning around implies the rare element business is too.

MCP is a speculative buy right now, but if it can punch past the resistance at $7.40 (with or without filling in today's gap), that's when the bullish fireworks could really begin.

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