For his second Executive Decision segment of "Mad Money" Wednesday, Jim Cramer spoke with the head of one of his favorite SPACS, MP Materials (MP) , by checking in with its chairman and CEO, James Litinsky.
Litinsky said there's a new gold rush happening as our country rushes towards electrification and it's crucial that America takes control of its supply chain, including rare earth materials. MP Materials is the second-largest producer of rare earth minerals, he said, but most of the country's magnets are still made in China. Magnets are a key component not only of electric vehicle motors, Litinsky said, but also are used in drones, wind turbines and countless other applications.
Unlike many recent special purpose acquisition companies, MP Materials isn't filled with hopes and promises, Litinsky said. The company is profitable today and has all the capital it needs to stay that way and grow.
We looked at the charts of MP back on Dec. 17 and wrote at that time, "We do not have a lot of price history to work with, but what we do have is positive. Build a long position slowly and risk to $21. The $48-$50 area is our price objective for now." Let's check the charts again.
In this daily Japanese candlestick chart of MP, below, we can see that prices have traded higher from our mid-December review and never got close to our stop of $21. Prices dipped in early February to test the rising 50-day moving average line. Trading volume has been active since November as the rare earth story spreads. The On-Balance-Volume (OBV) line has remained strong and tells us that buyers of MP have been more aggressive, with heavier volume traded on days when the stock has closed higher. The 12-day price momentum indicator shows a slight decline from late December to February. This is a bearish divergence but not a long one that would be worrisome.
In this daily Point and Figure chart of MP, below, we can see a potential downside price target in the $20 area. There also appears to be support just below the market.
In this weekly Point and Figure chart of MP, below, we can see a potential upside price target in the $51 area.
Bottom line strategy: Longs should raise their stops to $30 from $21. Ideally, I would look for a $35-$44 trading range for several weeks before resuming the advance, but prices have often ignored my opinions.