A Rising Tide
April 24, 2009
The past year for uranium investors has been a painful
chain of lower lows followed by further lows. Most of those late to the game in
the last bull market lost their shirts and those of us with large paper gains
saw those dissipate into paper losses. Our feeling is that this market is
finally turning into long-term uranium bulls’ favor now that credit and capital
markets have thawed to their current state.
Back on November 3, 2008 we authored an article entitled,
“Uranium Equities: Time to Test the Water,” in which we stated that, “for the
first time in many, many months we saw some strong buying in uranium stocks
which was not met by even stronger selling.” Our recommendation was to gently
wade back in, and we supplied two stocks, Cameco and Ur-Energy. Cameco is up
18.72% from that date and we are proud to report that Ur-Energy is up a whopping
44.23%! All of this taking place during the greatest bear markets since 1929,
and to take this for granted would be remiss.
Giving credit where credit is due, we would point out that
our publication date hit the “nail on the head” on what we feel will prove to be
the ultimate low for uranium equities. Many of our favorites have doubled or
tripled since the lows set at the end of last year.
Cases in Point:
Mega Uranium (MGA.TO)
Paladin Energy (PDN.TO)
Pinetree Capital (PNP.TO)
Uranium One (UUU.TO)
After examining chart patterns for many of the uranium
equities which we follow over the past month, we would point out that most, if
not all, are trading above their 50-day moving averages. Also, and more
importantly, a good many have 200-day moving averages that have “caught up” with
the current stock price. We have often found in bear markets that when the
200-day moving average flattens out and begins to move up, you usually have an
attractive entry point based on price. We would point out that we have seen
some powerful price breakouts in the uranium arena when the stock price managed
to break through its respective 200-day moving average.
Notice volume ticking up at
the end of the chart, supporting this most recent leg up.
Once again a break-out from
the 200-day, a test of support and rising volume…all bullish signs!
Although we have our favorites and suggest juniors that are
well financed with attractive late-stage projects, we would point out that the
entire uranium arena is positively correlated when it comes to price movement.
Simultaneously, with the improved technical outlook for uranium equities we
would point out that in viewing the macro economic environment it appears that
the clouds seem to be lifting a little (or at least are not as dark as they once
were). Equally important is the fact that the merger and acquisition/strategic
investment activity by major industry players appears to be on the rise. If the
hedge-fund sell-off debacle had not rocked uraniums so hard, our bet is that
many stocks would be much higher than their current prices, most likely closer
to their all-time highs, and this activity confirms that today’s prices are dirt
cheap! All of the above support our long standing belief for long-term
accumulation of uranium equities, including at this time.