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« The Uranium Stocks Pullback: Have We Ever Seen Anything Like This? | Main | Crosshair Exploration: Nearing a Buy Again »

Uranium Stocks: Stirred but not Shaken!

Looking through a sample of the stock charts this morning is enough to give any investor in this sector indigestion. Sadly most have been hammered with the 50dma heading down through the 200dma and thus suggesting more weakness in the pipeline.

Add to this the view of one of our respected readers who wrote:

“I agree that the fundamentals for U are excellent and improving, however given the volatility in general markets I don’t intend to start repurchasing U stocks until I see a confirmed change of direction and momentum to the upside. I feel that when this does happen we will see some very significant upside moves, and given the circumstances, I am willing to forego the first 10-20% in order to be sure of the change of direction. Until then…………”

This comment generally sums up the feelings of our readership at the moment, one of caution but never the less watching the market in order to identify a re-entry point.

When we take a look at the chart of uranium’s progress we can see that its long upward only march has come to an end as the spot price hit $138/lb level and has now fell back to an ‘estimated’ $120/lb.

Uranium Chart 07aug07

Is it time to dump our uranium stocks? Our small group of investors asks us nervously? This is textbook stuff isn’t it? When all those around us are heading for the door do we do the same?


For any asset class the rules are pretty much the same, the time to add to our positions is when everyone else is dumping. Buy when there is blood in the streets or in our case when the monitor is glowing with red. That was difficult yesterday when some of what we regard as quality uranium stocks took it on the chin. Should we charge back in to this market with total disregard of the current situation? Not really, as the reader above suggested we do need to see a few signs that the carnage has come to an end.

So now the job at hand is to watch for our stocks to consolidate and maybe go sideways in the short term. Then we need to look for trend reversals to give us a degree of comfort that the stock is on the road to recovery. Then we can start to add to our positions with a little more certainty that the downside is limited.

If you are one of our are regular readers of our adventures in to this sector of the market you will be aware that our strategy was to hold through the summer doldrums as we were of the opinion that the price of uranium would increase this year. As uranium has almost double this year we feel somewhat vindicated in taking that stance. However, based on this price increase we would have expected the price of the uranium miners to at least keep up with the underlying asset. This did not happen so we can only conclude that our market, being extremely thin, is subject to severe oscillations as speculators move their cash in and out as they think fit. There is nothing wrong with making a buck in this fashion but it has surprised us just how quickly investors moved their cash out of these stocks. However, they are now on the sidelines and have to decide when to come back in again. There is nothing like a win to encourage an investor, complete with all his superstitions to return to place of his prior success. Filled with courage he will probably hit it harder than he did the first time around.

So we now have a group of investors who are about to return to this sector, which we see as a positive influence, in our humble opinion.

There is also a second group of investors who have ‘discovered’ our sector and are actively looking for an opportunity to enter this market. An indicator that these people exist comes from our daily viewing traffic, which on average includes 40% of new readers. You can argue that this is not very scientific and we would agree with you but it is indicative of the word slowly spreading to those who are only now taking an interest in uranium stocks.

The third group of investors are those who have yet to discover this investment opportunity. As we demonstrated recently in our article entitled “Uranium, Gold and Silver: Traffic Trends” about Internet searches. Compared to gold and silver, which are also small market sectors, uranium hardly made an impression on the chart. This tells us that uranium is still largely unknown and as these people become more enlightened so the number of investors will swell and add to the upward pressure on uranium stocks.

We remain as positive as ever as the demand has not gone away and the supply is still slow in playing catch up. We are preparing to add to our portfolio going forward as we see this period as the bargain basement opportunity of the year.

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Reader Comments (1)

I agree, between your site and the daily reckoning, this information is priceless. I have been believing in Uranium stocks now for a while and i'm glad someone else is too. You provide that added kick to keep me in the market even when things look bad. For everyone else, keep reading and check out this article also...


August 7, 2007 | Unregistered CommenterDan

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