Merv's Weekly Commentary, 17 Feb 2008

Merv’s Weekly Uranium Review
for week ending 15 Feb 2008

After a depressing four or five weeks we finally got an up week. Unfortunately, one week does not a trend make but it’s a start. The price of uranium has not been acting well for some time (check the links on the left) and this may be part of the problem with the stocks. Although the two may not always move in concert, over a reasonable time period they do end up in the same trend. You can always expect the stocks to over extend (or under extend) themselves and this is probably the major cause of this year’s decline, stocks coming down to some more reasonable price versus where they started a few years back. So, what do the markets look like today?

Looking at the long term and the Merv’s Weekly Uranium Index the one week up move barely makes a tint in the chart. We’ve been so far down that it will take much more upside to start turning the long term trend around. The Index closed up by 517.73 points or 7.21%. There were 33 weekly winners, 13 weekly losers and 4 stocks unchanged. Of the five largest uranium stocks by market value, one was a bummer while the others had a good week. Cameco gained 11.7% on the week, Denison gained 10.3%, First Uranium lost 3.7%, Paladin was a great gainer being up 27.4% and Uranium One gained 5.7%. The best weekly performer was Powertech Uranium with a gain of 31.4%, inching out Energy Fuels which had a 31.2% gain. The loser of the week went to Xemplar Energy which lost 18.0% on the week.

The Index remains well below its long term negative sloping moving average line. The long term momentum indicator is bouncing off a new low inside its negative zone but as yet it is far short of a turn around. At this time I must remain with my BEARISH rating on the long term.

As for the intermediate term I go to the Merv’s Daily Uranium Index to see what’s happening. Here, the Index closed Friday down 0.013 points or 0.38% (you will note that there is a different Index value scale between the daily and the weekly). This decline was reflected in the daily winners and losers statistics where we had 17 winners, 27 losers and 6 unchanged. As for the 5 largest stocks, Cameco gained 1.0%, Denison lost 1.6%, First Uranium gained 0.8%, Paladin gained 2.9% and Uranium One lost 3.2%. The best daily winner was Powertech Uranium with a gain of 11.9% while the worst loser was NWT Uranium with a daily loss of 9.6%.

Intermediate term wise we are still where we have been for some time. The Index remains below its negative sloping moving average line and the momentum indicator remains in its negative zone. Momentum has been above its positive sloping trigger line suggesting its trend was to the up side. It still is in that position but has turned towards the down side and heading back towards that trigger line as its immediate direction. It has not crossed below the trigger and that may need a few more days of downside action but its immediate direction is towards the trigger. If it should cross back below the trigger that would eliminate one of the very few positive intermediate term signs. The other positive is the volume indicator. It had crossed above its trigger line on Wednesday but the trigger still has not turned to the up side. The volume indicator is once more turning towards the trigger but still is above it. I need the trigger line to turn into the direction of the indicator to give me confirmation as to the trend of the indicator. Crossing the trigger is great, turning the trigger line is priceless. For now I must continue with the BEARISH intermediate term rating.

Of note on the chart is the fact that the Index action did not quite break through that megaphone pattern. It had crossed during the day but could not close above that upper trend line. We will have to wait another day, or longer, for the break. Let’s hope the break is to the up side not the down side although this pattern is more of a continuation pattern rather than a reversal pattern.

The Index couldn’t break through the resistance line but it still remains above its short term positive sloping moving average line. The short term momentum indicator is well above its positive trigger line but short of crossing its neutral line into the positive zone. The momentum indicator has turned its direction to the down side but is still some distance from the trigger so there is little thought that a downside crossing is imminent. Looking at the more aggressive Stochastic Oscillator, it continues to the up side and is very close to entering its overbought zone, but not quite yet. It does seem to be in a topping mode and just could turn its direction back to the down side with another bummer of a day. For now, although there are signs of the trend starting to weaken the indicators are still solidly in the positive so the short term rating continues to be BULLISH.

We still need another couple of days of positive Index action to be comfortable getting back into the buying mood. Gamblers can always find something to gamble on. Speculators wait for firmer indications of a trend change and investors wait until it is far too late to really profit. Although speculators may miss the first 10 to 25% of a move they get in at a lower risk level. It’s all in the risk one is willing to take and not complain later.