Rare Earth elements and their corresponding mining companies have been in the news and prices for rare earth metals are rising almost vertically in a roaring bull market. Elements such as lanthanum, europium and neodymium are gaining popularity in the investors' vocabulary even as their prices soar five to six times in 2010 alone. The key question for investors is whether this rare earth bull market has legs or is it a short-term bubble that will die like most bubbles and leave many investors in ruin? Learning to play the rare earth bull market is critical to getting in and out at the right time with plenty of profits.

For investors, starting with Rare Earth ETF (REMX) is a good place to begin investing in the Rare Earth space. The harder question is - should an investor put any money into this market? Commodity investing is hard as it is, but focusing on a niche space based on headline news such as "China lowers export quota on Rare Earth" may well make it too late for the average investor to get into the market. Usually, by the time news is in the headlines, the big money has already been made.

Is that the case for Rare Earths as well? For this, we will rely on a pattern that the professionals at Elliott Wave International share with us. There is, in any bull market, a "point of recognition" when everyone becomes aware of the bull run, and comes investing into that space in large numbers. Fortunately, this usually happens in the middle of the bull market or sometimes slightly past the mid-point of the bull run. This means, the Rare Earth run may still have some more time to run, perhaps another year or so.

Having said that, one must remember the past commodity niche runs such as uranium where once a parabolic rise in prices stops, the prices of underlying mining stocks get beaten down mercilessly. For this, we would recommend applying a selling rule where you take say 10% off the table upon every 20% rise in value of your rare earth portfolio. You can choose to institute any variation of the above for taking profits off the table and not waiting for the absolute top to be in.

We can write a lot about the fundamentals - various uses of Rare Earth, the difference in usage versus amounts available for use - but you can find that information through your own research in this area. Most importantly, follow what we recommend for mining stocks -

1. Buy companies that are producing or close to production
2. For rare earths, focus on companies in geo-politically stable situations, and outside China
3. As a second level of research, target those that might be acquisition targets

Names such as MolyCorp and Rare Earth Resources show up repeatedly on recommended rare earth lists, and are good places to begin your research.

Happy Investing!