MP Materials Stock Is Rallying, But I'm Not Buying - Here's Why

MP Materials (NYSE:MP) has seen an impressive rally over the past few months, climbing from around $20 to $65, a gain of more than 200 percent. This move has been fueled by positive developments in the rare earth industry. However, under the lens of the Adhishthana Principles, this rally comes at an unusual time, and chasing it may not be the best strategy.

MP Materials Monthly Cycle Shows Early Rally

On the monthly chart, MP Materials is currently in Phase 2 of its 18-phase Adhishthana cycle. The Adhishthana Principles are a proprietary framework that forecasts stock behavior using cyclical analysis, blending quantitative signals with behavioral patterns.

Phase 2 has two parts. It begins with the Sankhya period, which is typically marked by consolidation or bearish moves, followed by the Buddhi period, which is known for large, sustained breakouts.

For a better understanding of Phase 2 and how it typically plays out, see our Carvana analysis, which outlines a textbook Phase 2 structure.

In the case of MP Materials, the stock is experiencing a major rally during the Sankhya period, a phase that should generally show weakness or sideways trading. This is a misalignment with the principles and is often punished by the market once the Buddhi period begins.

A recent example of such misalignment is e.l.f. Beauty, which also rallied during the Sankhya period. The move was followed by a significant correction when the Buddhi phase arrived.

"Decisions should follow only when alignment with the Principles of Adhishthana is achieved. If Phase 2 is not executed properly, the Yajña, C5, and C6 must be observed before making a decision."
— Adhishthana: The Principles That Govern Wealth, Time & Tragedy

Investor Outlook 

With this rally arriving in the wrong part of its phase cycle, caution is warranted. While the current momentum in MP Materials could continue in the short term, the underlying cycle analysis signals potential turbulence ahead, particularly once the Buddhi period begins.

For existing investors, hedging through options may be prudent. While many of our clients are avoiding this rally, those who do hold positions in MP Materials have already implemented hedging strategies in anticipation of possible volatility.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.