U-308 in a Bear marketBASIC NOTES
Uranium Companies
There are very few pure uranium companies. Most companies, especially the small exploration type, are active in more than the uranium industry. This blog makes no attempt to guage the percentage of a companies activity that are related to the finding, mining or processing of uraniun. They all do, however, have some uranium activities (to the best of our review).
Merv's Uranium Indices
I have developed two Uranium Indices. They each have the same component stocks but are calculated using different methodologies. My weekly Index is based upon the average weekly performance of the component stocks. My daily Index is based upon the daily average of the component stocks open, high, low and close prices along with the daily average volume of all component stocks.
Click on the chart or table to enlage the view.
14 February 2008
Paladin Resource Ltd. (T-PDN), 14 Feb 2008
In my slow review of the top five uranium stocks, today I take a look at number three, Paladin Res. Ltd. With a limited historical data I am deviating from my usual weekly and daily charts and substituting a P&F chart in place of the weekly chart. On the chart the red lines are down trend or resistance lines and the blue lines are support or up trend lines. The thickness of the line is one way of suggesting the primacy of the line, the thicker the line the greater the primacy.
A quick review of what has happened in the past the P&F chart shows a steady bull market from the start of the chart below the $1 level to the $9.75 in early 2007. A P&F bear confirmation came on the move to $8.00 when the up trend line was broken and the price moved below two previous lows. Although not shown on the chart, this break projected to the $3.75 level per a P&F horizontal count method. On its way to the projected price PDN had one bull move which was short lived. That move came at the $6.00 mark and reversed at the $5.50 mark. The latest action suggests a potential new bull break. The latest move has broken above two previous highs but is only right on top of the down trend line. One might say that a bull market is in process but I need to wait for that down trend line to be broken before reversing the trend to bullish. That would come, as far as the P&F chart is concerned, with a move to $5.25.
Looking at the daily chart we are just shy of a reversal on the intermediate term trend. The price is just below a still negative sloping moving average line. The momentum is still in its negative zone but moving aggressively higher and is above its positive trigger line. The volume indicator is moving higher and is now above its intermediate term positive sloping trigger line. The intermediate term is still rated as BEARISH but is at a point where that rating could reverse very quickly.
On the short term all is positive. The price is above its positive sloping moving average line. The momentum is above its positive sloping trigger line and is in its positive zone. The volume indicator is also above its positive sloping trigger line. The short term rating is therefore BULLISH.
Posted by Merv at 10:40 AM 0 comments Links to this post
13 February 2008
Merv's Daily Commentary, 13 Feb 2008
After the Close, 13 Feb 2008
Things are looking better and better. It was a real positive day for the uranium stocks. The Merv’s Daily Uranium Index closed the day with a gain of 0.088 points or 2.72%. The winners and losers looked even better. There were 36 winners and only 6 losers. Eight stocks closed unchanged. Except for one stock the top five also had a good day. Cameco gained 3.6%, Denison gained 4.0%, First Uranium lost 1.5%, Paladin gained 7.3% and Uranium One gained 3.6%. The best performer on the day was Magnum Uranium with a gain of 18.2% while the worst performer was Mega Uranium with a loss of only 6.8%.
Even on the intermediate term the indicators are showing signs of waking up. Unfortunately, the major trend indicator, the intermediate term moving average line still has some distance to travel before it can turn around. It is still well above the Index and is still pointing downward. The momentum indicator is also still in its negative zone but pointing upward and is above its trigger line. Strengthening in the price action can be noted by the momentum indicator already above its level of the past three weeks even though the Index is yet below its three week highs. The volume indicator has also just moved above its trigger line although the trigger line is still pointing downward. Although the signs of strengthening and possibly turning are there they are not yet enough to revise the intermediate term rating. The rating remains BEARISH for another day.
As can be expected any reversal of trend should be first seen in the short term data. The Index is now above its short term moving average line and the line has now turned upward. The momentum indicator, although still in its negative zone, has turned up sharply and heading towards its neutral line. Another day or two will do it. Its trigger line has turned upward to confirm the short term direction of the indicator. The volume indicator is above its trigger line and the trigger is pointing in the upward direction. From all of these indicators I must upgrade the short term rating to BULLISH.
Not to be overlooked but the Index is still trapped inside that megaphone pattern and still has some resistance levels to overcome from the highs of the past few weeks, but all of that is to worry for another day.
Short term traders can be more comfortable with trading on the up side BUT intermediate term investors or speculators should remain cautious. There may be individual stocks that are moving ahead of the Index (which is basically an average of 50 stocks so some must be moving ahead). Speculators may start to feel a little more comfortable now but ALWAYS have your exit strategy operational and act on it should the market surprise and reverse.
Posted by Merv at 5:30 PM 2 comments Links to this post
Uranium One Inc. (T-UUU), 13 Feb 2008
Yesterday I looked in on Cameco, the king of the uranium stocks. Now it’s time to look in on number two, Uranium One Inc.
The Uranium One of today is a merged, combination of several uranium companies over the past year or so. How applicable is the historic market action in this stock to today’s position is questionable but hell, here goes.
After breaking on the up side in mid-2005 at $5 the long term trend of UUU has steadily moved to the mid $18 level before turning and going into a bear trend. Once again, by time the price dropped to the $14 level there was plenty of long term technical signals that things were going down hill. I wouldn’t go through all the indications but you can see them on the long term chart.
As for where we are now, I had looked at UUU in some detail on 08 Fen 2008. There is really not much more to add to that commentary so I would suggest scrolling down the page and check out that commentary.
UUU remains BEARISH for all three time periods, short, intermediate and long term.
Posted by Merv at 10:36 AM 0 comments Links to this post
12 February 2008
Merv's Daily Commentary, 12 Feb 2008
After the Close, 12 Feb 2008
Slow and steady wins the race, or so someone said. Well, the uranium stocks are slowly getting their act together, again. Whether they will continue remains to be seen. The Merv’s Daily Uranium Index closed on the up side again with a gain of 0.037 points or 1.15%. The winners and losers were once more on the winner’s side but only barely. There were 24 winners, 20 losers and 6 unchanged when the day was finished. I wrote earlier that Cameco was starting a rally and it didn’t disappoint today. Cameco was up 4.0%, Denison was up 2.0%, First Uranium was down 1.8%, Paladin was up 5.4% and Uranium One was up 2.7%. The best performer was JNR Resources with a gain of 16.4% while the worst performer was Frontier Pacific with a loss of 7.0%.
The only indicator that has gone positive as far as the intermediate term is concerned is the momentum indicator moving above a now positive trigger line. It is still well inside its negative zone so all this tells us is that the indicator is now moving higher but has a lot more to go. The volume indicator is also moving higher but has not yet breached its negative sloping trigger line. The Index itself is moving higher very slowly but is still some distance below its negative sloping moving average line. The sum of all this is a continuing BEARISH rating for the intermediate term.
The short term is where you should see the trend change first. The Index is trying to break through its short term moving average line but has not quite made it yet. The moving average is still sloping negatively but is straightening out in anticipation of a reversal. The volume indicator has crossed above its short term trigger line but the line itself has not quite turned to the up side. The momentum indicator is still in its negative zone but above its trigger line. The trigger has also just turned to the up side. Things are starting to get a little more positive on the short term but not yet anywhere near a reversal. However, I will upgrade the rating to – NEUTRAL, one level above a full bearish rating. The best I can say is that it’s going in the right direction.
Not yet positive enough for the investor or speculator to be jumping in. That will come, hopefully very shortly.
Posted by Merv at 5:30 PM 2 comments Links to this post
Cameco Corp. (T-CCO), 12 Feb 2008
There have been so few uranium stocks that are in bullish modes that I thought I’d just review, over the next few days, the largest stocks by market value. As mentioned last night in my After the Close commentary, the five largest companies have a combined market value that is 70% of the total Index market value of 50 stocks. The king is of course Cameco Corp., which I look at today.
First, let’s look at the historical and long term trend. The weekly chart does this quite well. From a low of $2.50 in early 2000 CCO had a great run and finally topped out at $60 in mid-2007. Since then it’s been down hill.
We had all sorts of warnings that things were coming to an end. There was the steady negative divergence in the long term momentum. There was also a negative divergence in the volume indicator at the mid-2007 top. In mid-July we had the price move below the moving average line with the line turning downward. At the same time the momentum indicator went negative. Lately the volume indicator and the price broke below two year old support levels with the momentum moving into new lows. The price break was below a head and shoulder neckline. That break suggests a move to the $20 level, which is still about 33% below the present level. From a long term perspective there is nothing here that one can grasp and expect a new bull market soon. It may happen but the chart does not say so yet. It's still long term BEARISH. When the turn finally comes we will see it here.
As for the intermediate term we go to the daily chart. We could cover the intermediate term real fast by stating that the price is below its negative sloping moving average line, the momentum continues in its negative zone and the volume indicator is below its negative sloping trigger line and continuing lower within a well established downward sloping channel. We could say all that but there is more. Trying to find some positive signs we see that the volume indicator and price are very near their support levels so a rally of some sorts may be expected. In the latest rush by the price into new lows the momentum indicator held its line. It did not quite move into new lows with the price. A small plus but at this point I’ll take what I can get. The momentum is also just about to move above its trigger line although the trigger is still in a negative slope. This might suggest a rally in the starting phase with momentum direction turning upward. However, the bulk of the intermediate term information still requires a BEARISH rating.
Although the price is still below its short term negative moving average line the short term momentum gives us some hope that a rally has started. The momentum is still in its negative zone but it has indicated a very positive divergence recently and since then has bounced off its oversold line for an indication that it wants to go higher. Some encouragement that we will have to watch.
Even should a rally get going there is still nothing here that tells us the bear is finished. Before investing one should be sure the appropriate indicators have verified a reversal of trend, otherwise one might get a shock shortly after.
Posted by Merv at 10:51 AM 0 comments Links to this post
11 February 2008
Merv's Daily Commentary, 11 Feb 2008
After the Close, 11 Feb 2008
That’s two up days in a row. I don’t know if I can stand all this excitement. Of course, from a little acorn a big tree will grow, or something like that. The day ended with the Merv’s Daily Uranium Index closing on the up side, a whole 0.013 points or 0.42%. The winners and losers were almost at a stand still with 23 winners and 21 losers. Six stocks didn’t move at all. As for the top five stocks by market value, representing 70% of the total Index market value, Cameco gained 0.1%, Denison gained 3.6%, First Uranium gained 0.5%, Paladin gained 4.0% and Uranium One gained 0.3%. The best performer was Pitchstone Exploration with a gain of 15.0% and the worst performer was Xemplar with a loss of 16.0%.
The small move was still not enough to make a dint in the intermediate term prognosis. We still have the Index well below a negative sloping intermediate term moving average line and the momentum indicator continues inside its negative zone. Today’s momentum move did take the indicator just a hair above its trigger line but the line remains sloping downward. The volume indicator (not shown) continues below its negative sloping trigger line although it is heading in an upward direction. All in all, I still can’t change the rating, it remains BEARISH on the intermediate term.
With two up days things are starting to move towards a change in trend on the short term although there still needs to be a few more good upside days. We have a megaphone pattern showing up in the short term activity. Unfortunately, this is most often (but not always) a continuation pattern which suggests that the Index will more likely break on the down side. Let’s hope that this is one of the exception cases. The daily high just touched the short term moving average line but closed below on the day. The line is still sloping downward but one can see it starting to flatten out, possibly in anticipation of the Index moving through it. The short term momentum indicator continues deep in its negative zone and had been inside its oversold line but has moved just above the oversold line. It continues to track a somewhat lateral trend and has close just above its trigger line. The line has now turned to the up side. As for the volume indicator, it is still below its short term trigger line and the trigger is still sloping downward. Putting everything together I must still rate the short term as BEARISH. The immediate term direction of the Index is upward so we just might see some strengthening in the rating tomorrow, but let’s wait for that to happen.
I hope no one expects miracles from this blog. I cannot predict the future. I can only read what the market action is telling me and suggest what IS happening and possibly what MAY happen based upon similar patterns and events having occurred in the past in other markets. You go with the best you have and always be prepared for a surprise turn around should it happen.
I try to keep things as simple as possible in these commentaries and analysis. I have long ago learned in my other profession (Aerospace Engineering) that you make the least mistakes when you keep things simple.
Posted by Merv at 5:58 PM 0 comments Links to this post
10 February 2008
Merv's Weekly Commentary, 10 Feb 2008
Merv’s Weekly Uranium Review
for week ending 08 Feb 2008
Another week and another bummer. That’s five weeks now since we had a weekly upside closing. That’s not unusual but one doesn’t like to see it anyway. Looking at the two charts, the Daily and Weekly Indices, one can see a significant difference in pattern lately. In the daily chart we are still not at a new low but in the weekly chart we are. I was initially mystified about this difference until I realized that the weekly chart only shows Friday closing prices and does not take into account the action during the week. This was the action that caused the daily chart to show a lower low a few weeks ago. Which Index to use? Well I would only use a daily data chart except for the fact that my daily chart only goes back a little over a year and does not show a long term trend. Therefore I use a weekly closing chart for the long term trend and analysis while the intermediate and short term are analyzed using the daily chart. I may start to use the daily for long term analysis when I have enough historical daily data but will still show the weekly Index for its several year historical trend.
The Merv’s Weekly Uranium Index closed down another 421.85 points or 5.55%. there were only 6 weekly gainers, 43 weekly losers and 1 unchanged. The five largest uranium stocks by market value did not have a good week. Cameco lost 1.6%, which almost looked like a winner compared to the other four stocks. Denison lost 9.8%, First Uranium lost 10.0%, Paladin lost 6.6% and Uranium One lost 15.9%. The best performer (of those 6 upside winners) was Western Uranium with a gain of 6.9% while the worst weekly performer was Aurora Energy with a loss of 16.3%. With a 42% gain on Friday one wonders whu Xemplar was not the best performer during the week but it LOST so much during the week that the Friday performance did not even get it into the weekly plus category.
The long term bear continues to roar. The Weekly Index remains below a negative sloping long term moving average line and the long term momentum indicator continues to go deeper into its negative zone. Another piece of long term information is the summation of individual stock long term ratings. Those ratings stand at a bullish 10% and a bearish 72% (this can be found at the bottom of the weekly table). What can one say except the long term rating remains BEARISH.
On the intermediate term nothing has changed. Although Friday was a mild up day overall it was not anything to cheer about as far as the cumulative effect for the week. The Daily Index continues to trade well below its negative sloping intermediate term moving average line and the momentum indicator continues in its negative zone below its trigger line. The indicator has turned towards the up side but needs more days of action to really make an impact. The trigger line is still pointing downward so the two, trigger line and indicator, are converging but not yet crossing. The volume indicator is still quite weak and is below its negatively sloping intermediate term trigger line. There seems to be a serious lack of speculative interest at this time in the uranium stocks. Unless that interest perks up one should not expect any concerted upside moves. The summation of individual stock ratings is also in miserable shape with a bullish 8% and bearish 84% summation. As with the long term, the only rating I can give the intermediate term at this time is a BEARISH rating.
Friday’s small advance in the Daily Index was of very little help in firming up the short term. Here too the Daily Index continues below a negatively sloping short term moving average line and the short term momentum indicator remains deep in negative territory. It had been inside its oversold zone for a couple of days but has just inched above the oversold line on Friday. The more aggressive Stochastic Oscillator is still in its oversold zone but has turned upwards and could break above on one additional day’s action. A detailed look at the short term momentum indicator just might imply some underlying strength in the Index. The Index made a lower high on Monday versus a week ago and also a lower low on Thursday versus a week ago. The momentum indicator made higher highs and higher lows at the same time. It’s not much but one grabs on to what little good news there is. The short term summation of individual stock ratings is as much of a disaster here as it was in the other time periods. The summation stands at a bullish 12% and a bearish 79%. With all that the short term rating remains BEARISH.
Prudent investors and speculators would wait for a more favorable uranium stock climate before risking capital on the buy side. Gamblers (and that includes a great bulk of the fundamental “investors”) always risk their capital no matter what the overall group, or market, happens to be doing.
Posted by Merv at 2:03 PM 0 comments Links to this post
Merv's Weekly Uranium Table, 10 Feb 2008
Posted by Merv at 12:08 PM 0 comments Links to this post
08 February 2008
Uranium One Inc. (T-UUU), 08 Feb 2008
“Trader” asked some interesting technical questions in the 07 Feb 2008 comments. I thought I would do an analysis of Uranium One while answering those questions as others might be interested in the information also.
The On-Balance Volume (OBV) seems to be giving us a positive divergence versus its low in early November. The plunge in late Oct was due to some extreme high volume days and it skewed the indicator. However, the action subsequent to the early November low was quite normal. We have the masses jumping in on the buy expecting to “bottom fish” the stock after such a sharp drop. They may be forgiven to think that we had a selling climax with the stock hitting its bottom. The lateral action most likely represents the masses bottom fishing while the professionals selling out. The subsequent plunge to new lows shows that the sellers were the ones in control. During such move into new low territory the masses do not want to admit an error so they do not sell but hold on, therefore the subsequent move to lower prices is on lower volume, and a divergence in chart pattern. It is still a valid divergence but one should understand what it really means. Indicators by themselves DO NOT indicate a reversal of trend, only a trend indicator (such as a moving average) will do that.
As for the question about the MACD (not shown) and its divergence, again one must understand what the MACD is actually telling you and more specifically how it is constructed. The MACD is simply the difference between two exponential moving averages, one a 12 unit (day) and the other a 26 unit (day) moving average. It is based upon the points difference between the moving averages. It is, in my view, an example of a price momentum indicator. When comparing the low in early November versus the low recently one has to understand that the previous low was made by a plunge of 5 dollars in price while the plunge recently was only 2 ½ dollars. One would not expect the indicator to move the same amount on both occasions. Modifying the MACD by using percentage difference in price as the indicator one gets the indicator almost at the same level as it was in early November. I am not an admirer of the MACD although I occasionally show it because so many investors seem to think it is so great. My preference for a price momentum indicator is the Relative Strength Index (RSI) using appropriate units versus the time period in consideration. I show the 50 Day RSI here as my intermediate term momentum indicator.
Taking volume action into consideration I combine the moving average and RSI information to get my rating for the stock, for the appropriate time period. For the intermediate term we see that the price of UUU is still far below a negatively sloping moving average line. The momentum indicator is still very much inside its negative zone (below the neutral 50% line) and the direction of the RSI is pointing lower. Although difficult to see, during the price lows of August, November and January this RSI DID make new lows so that we do not have a divergence here. Based upon the above my intermediate term rating would remain BEARISH.
Without going into details, the short term rating is also BEARISH. One would not be considering UUU as a purchase except if one was a gambler. A speculator would at least wait for the short term to brighten up. An investor would wait for the technical indicators to have confirmed a reversal of trend for his appropriate investment time period.
Posted by Merv at 4:45 PM 4 comments Links to this post
07 February 2008
Merv's Daily Commentary, 07 Feb 2008
After the Close, 07 Feb 2008
Another small loss for the uranium stocks. Last time we had four in a row the fifth day was the worst. Let’s hope that history does not always repeat. The Merv’s Daily Uranium Index closed down 0.019 points or 0.59%. The winners perked up a bit with 16 stocks on the up side, 30 stocks on the down side and 4 unchanged. Cameco gained 0.7% while Denison lost 5.1%, First Uranium closed unchanged, Paladin lost 3.1% and Uranium One down 3.2%. The best gainer on the day was Magnum Uranium with a gain of 8.0% while the worst loser was Uracan with a loss of 9.5%.
As far as the intermediate term is concerned I should just copy what I said yesterday. Nothing much has changed from the intermediate term standpoint. Today I show the volume indicator with its intermediate term trigger line. As one can see the indicator is making a new low ahead of the Index making a possible new low. It is never a good sign when the volume indicator is moving ahead of the Index on the down side. It suggests the speculative interest is on the down side. The rating therefore remains BEARISH.
The short term indicators remain the same as yesterday. The aggressive Stochastic Oscillator is now entering its oversold zone and may be preparing the Index for a bounce of some unknown magnitude. For now the short term rating remains unchanged from yesterday, i.e. BEARISH.
I guess one should continue to relax and have a beer. There’s a lot of relaxing and a lot of beer drinking but hey, that’s better than hanging in there and seeing your capital continue to go south. The uranium stocks will turn around some day and great gains will be made once that happens BUT from what level is an unknown. Readers will remember that my point and figure chart has given two projections yet unattained, one to the 2.7% level (14% from here) and the other to the 1.9 level (that’s still 40% away and probably will not be met, but who knows?).
Posted by Merv at 5:40 PM 2 comments Links to this post
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