Uranium Stocks: Driving You To Capitulation?
Sunday, August 12, 2007 at 8:42AM
Uranium Stocks in Uranium Mining Stocks
The recent volatility on the US stock markets has had a tidal wave effect on the uranium sector. The Dow Jones Industrial Average is down from a recent high of 14000 to close at 13239 on Friday for a loss of 5.4% in a couple of weeks.

DJIA 12 August 07

Many of the more cavalier investors would have had to face margin calls on their investments which is a pressure you can well do without when trying to make a rational decision. The sudden need to raise cash results in the selling of everything regardless of its underlying asset value. This pressure combined with the correction of the uranium metal itself has caused a stampede for the exit amongst some of those holding uranium stocks.

Is it over yet? We don’t know. It could certainly be volatile for a few more weeks. The massive amount of liquidity that has been pumped into the market should have a calming affect, but that remains to be seen. A sell-off of this nature is usually typified by total capitulation, a time when investors just can’t stand it any longer so they dump their stocks in order to stop the pain. Last Friday could well have been such a day when we witnessed many uranium stocks taking double digit hits.

Now bear in mind that we have a vested interest as all of our money is in uranium, gold and silver stocks. We don’t have a bean in any other sector, a strategy that makes us slightly different from mainstream investors, so you may wish to ignore the following view.

When faced with a portfolio that has turned down in a big way and your losses are significant there are number of actions open to us. We can sell up, sit tight, or if we have the nerve and think that the worst is over, buy again. Our loss at the moment is a paper loss only, it becomes a real loss when we press the sell button. Our strategy is not to sell but to sit tight and look for for the bottom of this downtrend to show itself. At that point we will become buyers once again in an orderly fashion.

Uranium is the underlying asset and the price is still north of a $100/lb. When the dust settles the world will still want more energy than it has ever needed before. Especially in China where an industrial revolution for 1.3 billion people is currently unfolding. Incidentally, have you looked at the Shanghai Exchange Composite Index shown below? No pull back there. Our fixation with the US market, as the ultimate indicator needs to be reassessed, as China, India and the Asian tiger economies become the dominant forces going forward.

Shanghai Exchange 12 aug 07
Article originally appeared on Uranium Stocks (http://www.uranium-stocks.net/).
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