Momentum, Geopolitics, and a Rare Earth Play

Welcome back to STP Algo Trader User Blog!

Each week, we'll bring you a unique perspective from a team member or a STP user.

Now, let’s dive into this week’s issue, brought to you by team member and amateur trader, Jessica Cadby.

Happy Wednesday!

In today’s article, I’m breaking down a strategy I use to spot breakouts before they happen—plus a look at the stock I’m currently trading using this strategy.

This particular stock is still worth keeping on your radar. It’s closely tied to volatile geopolitical tensions, which means it could be a rollercoaster of opportunity.

When I decide to put capital behind a stock, I go in with the understanding that I’m not buying the company—I’m trading the stock.

I use a couple different strategies when it comes to my trading, and for the most part I rely on fundaments and technical analysis.

But every now and then, to keep things exciting (and satisfy my inner adrenaline junkie), I like to add a trade that falls under the category of “thematic trading.”

It’s a totally different beast compared to my usual lower-risk, higher-probability setups—like the ones Signal Trader Pro identifies.

Thematic trading is less about company fundamentals, and more about spotting shifts in the market and positioning ahead of them. You’re not trading earnings reports or balance sheets—you’re trading trends.

In thematic trading, I focus on:

• Big-picture macro trends

• Policy changes and geopolitical shifts

• Market sentiment and momentum

• Shorter holding periods (typically weeks, not months)

• Higher risk, higher volatility speculative plays

• Niche stocks, small caps, or ETFs

It’s about identifying broader movements—technological, environmental, geopolitical—and catching the wave early.

In other words, I’m not trading companies. I’m trading ideas.

Recently, the AI boom turned virtually anything related to “artificial intelligence” into a momentum rocket. The theme is still at large, but now markets are rewarding companies with real earnings and execution—not just AI buzzwords.

So what’s caught my eye now?

Rare earth elements.

If you asked me a year ago what a rare earth element is, I would have guessed gold – and I would have been wrong.

Turns out, rare earths aren’t all that rare—but they are critically important. Unlike gold, their value isn’t symbolic—it’s functional.

Rare earth elements (REEs) are a group of 17 metals crucial to technologies like EVs, wind turbines, smartphones, semiconductors, and advanced military systems – just to name a few.

The U.S. Department of Defense even classifies rare earths as essential for national security. Some defense systems can’t function without them.

That alone would make them worth watching—but the geopolitical angle is where this gets interesting.

China controls about 60–70% of global production, and 90% of refining capacity. And with current U.S.-China tensions, that’s a massive problem.

China saw the strategic value early and invested heavily. And now, the U.S. finds itself almost completely dependent on one country for critical inputs across defense, tech, and energy.

That’s leverage. And China knows it.

The U.S. is nowhere near able to mine and process rare earth elements at scale. The mining infrastructure isn’t built out, and refining rare earths cheaply is extremely toxic to the environment.

We do have some mining capacity—like Mountain Pass in California—but even when we extract rare earths here, we still send them to China for refining.

The U.S. is clearly a long way away from having its own independent supply chain of rare earths.

But here’s the thing: I’m not trading based on the U.S. being ready today.

I’m trading based on the momentum of the narrative—policy, sentiment, psychology.

After digging into this theme, I found a small-cap stock that fits perfectly: USAR (USA Rare Earth). It’s a newer company with a big vision: to be a leading Western supplier of high-value rare earth magnets and critical minerals.

It’s one of only two rare earth companies operating in the U.S. that are publicly investable.

I did take a look into what the company owns and how it intends to execute its vision - and it is all pretty convincing.

But that’s not why I’m in the trade. I’m in it because they fit the narrative.

They’re early-stage, speculative, and volatile. In other words—perfect for thematic momentum trading.

I’m not planning to hold it for a decade. I’ve owned the stock for just over a week and have already sold 50% of my position.

Why? Because I got in when the U.S. narrative around rare earth independence started heating up—and I know that momentum trades can cool down even faster than they run.

I like to think of momentum like a pendulum. It takes only a small force to trigger massive movement. The swings can be wild, but eventually it calms—until the next catalyst comes along and sets it back in motion.

USAR is currently trading at $12.80 per share. If policy shifts to favorable trade with China and there no longer seems to be an urgent need to mine rare earths in the states, the stock could be back $8 that same day.

On the other hand, if policy is halted by an inability to move with China, USAR could to break out to its recent high of $18 per share.

It’s important to remember that momentum trades like this don’t last forever. Sentiment shifts. Geopolitical headlines fade. And the market tends to price in policy changes faster than they actually materialize.

But that doesn’t mean the rare earths play is gone forever after it settles..

Just take a look at USAR’s chart over the last four months –

The jump on March 14th was due to their merge with Inflection Point and debut on the Nasdaq. You can see it shot up, but fell quickly.

The next jumps in price action began from the tariff announcements on April 4th. The biggest gain in one day was on April 14^th - the day it was announced that China had halted exports of seven rare earth elements (REEs) and related materials, citing retaliatory measures against U.S. tariffs.

Once again the stock cooled off.

The latest uptrend is ignited from uncertain trade talks with China. On May 30th, President Trump stated that China violated its trade agreement, with the oh-so eloquent comment - “So much for being Mr. NICE GUY!” - once again fueling the momentum trade on rare earths.

Like a pendulum that can swing again with another nudge, momentum can reignite if the theme returns to the spotlight—policy announcements, geopolitical events, etc.

I can’t be positive if the latest breakout has a much more room to run, or if it’s heading back down - regardless I’m staying in tune with this theme and keeping my eyes on the chart.

It’s a trade you might also want to keep your eyes on! As long as we are dependent on rare earths, the need for U.S. to have their own independent supply chain isn’t going away.

Thematic trading isn’t about being right—it’s about being aligned with the right now.

Until next Wednesday… stay patient, stay hungry, and keep your eyes open. The next theme might already be whispering.