Like nearly all uranium stocks, Mega Uranium has recently been going through a downturn.

However, unlike some other uranium stocks like Laramide Resources, Mega Uranium has not formed a base or found a support line.

Unfortunately, Mega Uranium is stuck is a down channel as it has fallen from a high of nearly $9.00 to its last close of $5.55.

The down channel began around $7.00 and is illustrated on the chart above. A few weeks a ago, the down channel took Mega Uranium down through its 200dma, which could have been a major support line for the stock. We need to see some consolidation in the stock price to break this down channel and build a foundation on which Mega Uranium can build its next bull rally.

If we take a look at the technical indicators on this uranium stock, we see that the STO has spent some time at the very bottom of its range but now seems to have risen a little bit, perhaps signalling strength in the stock. The RSI has also spent some time on the bottom but now has risen to 41.78.

A spark to ignite the next bull run could be additional resource findings, seasonal buying or perhaps Mega buying more uranium properties armed with their cash arsenal of $112 million.

After a correction, stocks need to consolidate before moving higher on the next leg of its bull run. We would like to see MGA consolidating as this is a sign that much of the correction is now over and the stock is preparing for another rally, which we believe we come after the summer doldrums.

Mega Uranium trades as MGA on the TSX.