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« The Nuclear Tide is Turning: Now Israel Plans To Develop Nuclear Power | Main | Uranium, Gold and Silver: Traffic Trends »
Thursday
Aug022007

Uranium Stocks: The Carnage Continues


This is probably the most crucial point of the uranium bull market so far this year.

All uranium stocks are currently taking a pounding as a combination of seasonal selling and easily scared investors being shaken out by the small tick down in the uranium spot price.

Laramide is one of the worst hit uranium stocks as it has fallen 46% from its high.

Laramide The Carnage Continues

Although we are still holding a profit in Laramide, the correction has damaged our figures somewhat and the latest move by the moving averages does not give us any confidence in the short term. The 50dma has broken the 200dma which is usually a bearish sign, but we remain bullish on Laramide over the longer term. This correction has been going on for almost six months but in the next six months we think Laramide will make a new high, along with our other uranium stocks

Uranium Stocks MGA

Mega was also one of our best performers, but here too we see the 50dma breaking down through the 200dma. Mega has not made a new low since it traded at $5.08 in June which is a good sign and if Mega can keep holding this level and consolidating then this will be a sign of strength in the stock.

The Carnage Continues With KRI

Although we have yet to see Khan Resources’ 50dma breaking down through the 200dma, they are set for a collision course and it remains to be seen if the lines will bounce, or if we see a breakthrough. Either way, we are still very bullish on Khan over the long term and investors will soon recognise the value in Khan’s Mongolia uranium project and when this happens it will send the stock to a new high.

The Carnage Continues With CCO

Cameco may start to rebound before other stocks due to the large short position that was taken in Cameco a few weeks ago. Many people quote “its safer” as a reason to invest in Cameco rather than the smaller uranium stock but we would have to disagree as Cameco has not escaped any of the carnage ramping through the uranium sectors. It has fallen 31% and although some of the junior uranium companies may have fallen 40%, when the smaller uranium stocks go back on the upwards trail, they will outperform Cameco by a much larger factor than the 10% difference in the recent correction.

The question on every uranium investors mind is: When will this caranage end?

Unfortunately we cannot give a simply answer such as “August 8th and 2.30pm EST” because the market is not as simple as that. However we think we can give a simple answer to the question; “Will this carnage end?” The answer is a resounding Yes. The fundamentals have not changed enough to affect this bull market. While some investors may be uncomfortable about new uranium supply coming online this is not enough to stop this bull market that is far from over. The increased uranium supply has been washed away by Cigar Lake flooding (pardon the pun) and the fact remains that when the world shifts to nuclear power, the demand for uranium will be astronomical, pushing up uranium prices to our $200/lb target and sending our uranium stocks through the roof.

Now is a very important time in the bull market cycle as this is the point where weak investors are shaken out. Perhaps they didn’t full understand the fundamentals behind this bull market, or perhaps they were only in the market for a quick profit, but either way what we do not want to become is one of the people who sold now. Now is the time to be buying uranium stocks if you haven’t got any or adding to positions if you have, this is not the time to sell by any means.

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Reader Comments (3)

Re: your LAM.TO & MGA.TO charts.

To be significant (a Dead Cross), both averages (50/200 in this case) need to be moving in the same direction, down.

Likewise, with a Golden Cross, both averages need to be moving up at the point of crossover.

The 50 day MA, particularly on MGA, seems to be providing resistance...I'd be looking for a double bottom that breaches that average...but a fall below the June lows would be very bearish.

August 3, 2007 | Unregistered CommenterMartin

Hi

I have been following with interest your comments etc on uranium since earlier in the year and like your website and comments etc.

I have just liquidated most of my Uranium positions as I believe better money can be made elsewhere, namely buying puts on US lenders and property insurance companies ie LEND, PMI etc.

I will re enter the Uranium market once shares start trading above 50dma as then the shares will be in a confirmed uptrend. I still hold an options position in FRG.

Regards Iain colquhoun

August 3, 2007 | Unregistered Commenteriain colquhoun

Greetings from "Saudi Australia" where public sentiment is slowly changing towards Uranium. Once State Governments realise what side their bread is buttered on and de-politisise the U story, then I beleive massive investment will surely follow and the recent weaknesses will be overcome. Mega (MGA) I hear, is on the lookout for more Australian U companies.They obviously have the long term in their sights...... Strategy at the moment is to "Hang In There"........ Regards.......Mick

August 3, 2007 | Unregistered CommenterMick

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