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Cameco Corporation: An Option Calls

CCJ Chart 22 March 2011.JPG

As with Denison Mines (DNN) the above chart depicts the stock price of Cameco Corporation (TSX:CCO) (NYSE:CCJ) having been decimated largely due to the nuclear power plant problems emanating from Japan.

In weighing up the situation we are skeptical that this incident will be an Armageddon for uranium stocks and there are already signs that the uranium stocks sector is improving. We have therefore decided to purchase some Call Options on Cameco Corporation and they are the June 2011 series with a strike price of $38.00, for which we paid $1.00 per contract.

If you can find the time to watch the CEO, Jerry Grandey, on BBN, it is enlightening in that he is of the opinion that Cameco would appear to be largely unaffected by the recent events in japan.

Jerry Grandey 22 March 2011.JPG

Taking a quick look at the above chart we can see that Cameco was sold off very hard, but would appear to be over the worst of it. Having been floored the technical indicators are now heading north, with RSI rising to 33.46 and looking set to go higher. No doubt it will be a bumpy ride as investors jump on every rumour including the good, the bad and the ugly. However, if we allow this news story some time to run and the reactors are indeed stabilized then there is plenty of scope for Cameco to go to much higher price levels.

Articles such as this one from The Guardian in the UK casts a dark shadow over the future of nuclear power in general.

Support for new nuclear in UK falls by 12% following near-meltdown at Fukushima in Japan, Friends of the Earth finds Support for nuclear power in the UK has dropped by twelve percent following the near-meltdown at Fukushima nuclear power plant, according to a national opinion poll conducted since the earthquake nearJapan that triggered a devastating tsunami.

The nuclear emergency, which the Japanese authorities are still battling to contain, looks set to make it more difficult for the UK government to push through its planned programme of new nuclear power stations. Of those polled, 37 percent said they were now more likely to oppose the building of new nuclear power stations in the UK and 44 percent said they were worried about the safety of nuclear power plants here.

Anti-nuclear campaigners have been quick to seize on the disastrous events at Fukushima as proof that nuclear power can never be 100% safe. Craig Bennett, a spokesperson for Friends of the Earth who commissioned the poll said: "This poll shows that the government's plans for a major expansion of nuclear power in the UK are out of step with public opinion. People want clean and safe energy – the government needs to urgently refocus its energy policy, starting by improving the weak energy saving measures within its new energy bill."

The poll, which was conducted by GFK NOP shows a drop of 12% in support for nuclear power to 35% compared with a similar poll conducted by IPSOS MORI in 2008, 2009 and 2010. Opposition to the technology rose 9% to 28%.

Nikki Clark of the anti-nuclear Stop Hinkley campaign said: "We have definitely had more interest since the events in Japan: when we protested over the weekend people really wanted to talk to us about what we were doing, and find out more about the campaign. I think people are realising just how dangerous nuclear really is." She is one of several campaigners fighting EDF's application for a new power station in Hinkley.

But supporters for nuclear power continue to hope that in the long run the Japanese events will not spell the end for a form of energy which is, they point out, carbon-neutral. Environmentalist Mark Lynas has gone as far as offering on his blog to eat the milk, spinach and fava beans which have shown above average levels of radioactive iodine. "The political fallout," he writes, "will be more dangerous than anything physically radioactive."

The GFK NOP poll was compiled between 18-20 March and based on telephone interviews with 1003 adults.

They have yet to come up with a credible alternative and until they do nuclear energy must remain in the mix or the UK will face rotational blackouts and other such measures to account for the shortfall in power generation.

Cameco Corporation trades on the NYSE under CCJ and on Toronto under the symbol CCO with a market cap of $12.51 billion. It has a P/E ratio of 23.97 and a 52 week price range of $20.70 - $44.81 with an EPS of $1.32.

Many thanks to those of you who have recently signed up for our options trading service, its very much appreciated, a gentle reminder for those of you who are still thinking about it, the new pricing structure will apply as of 2nd April 2011.

Our model portfolio is up 138.05% since inception, Average return of 41.27% per trade, 67 closed trades, 65 closed at a profit or a 97% success rate. Average trade open for 43.21 days.

SK model portfolio 14 March 2011.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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Reader Comments (3)

I advocate to end the contest as of yesterday. My $1.15 guess looked very good.

I'll provide my name & address so you can send my twenty ounces of platinum.

Thank you!

March 22, 2011 | Unregistered CommenterJoeBronx

Whoops! Wrong thread. Sorry.

March 22, 2011 | Unregistered CommenterJoeBronx

and the wrong metal....

March 22, 2011 | Unregistered CommenterUranium Stocks

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