Merv's Weekly Commentary, 24 Feb 2008

Merv’s Weekly Uranium Review
for week ending 22 Feb 2008

Two weeks on the up side but still not a great start if this is a trend reversal. What I’m waiting for are a few good daily moves by the Daily Index to show enthusiasm behind the rally. So far there has not been that enthusiasm. I usually look for enthusiasm from the volume indicator. It has been zooming on the up side and one might think that the speculators are back in the swing. However, upon close examination that volume indicator is giving a wrong message at this time. Although the daily Index volume has risen sharply it is due primarily to one stock, Uranium One. That volume is almost all on the down side but the volume indicator only looks at the total daily volume and if the Index is up or down, it does not break the volume down into components. Just one of the little things one must learn about indicators, what are they really composed of and what are they really saying?

The Merv’s Weekly Uranium Index closed the week at 8056.20, up 353.16 points or 4.58%, a reasonable weekly gain but not great. There were 30 weekly gainers (60%) and 17 weekly loser (34%). The rest were unchanged. Of the five largest stocks Cameco gained 2.3% on the week, Denison gained 16.1%, First Uranium lost 10.5%, Paladin lost 0.9% and Uranium One lost 30.3%. The best performer of the week was Mega Uranium with a gain of 41.9% while the worst performer was that Uranium One loss of 30.3%.

Going to the Weekly Uranium Index chart we see that the Index is still far below the negative long term moving average line with no thought of closing the gap for at least a few weeks. The momentum indicator has turned upwards but is still well inside its negative zone. I would not rate the volume indicator until it has worked off that anomaly mentioned above. For the long term the rating remains BEARISH.

We slide over to the daily chart and data for the rest of our analysis. First the usual daily review. The Merv’s Daily Uranium Index closed higher by 0.030 points or 0.87%. It keeps nibbling on the up side but can’t seem to get a really good day going. There were 22 winners and 17 losers. That leaves 11 unchanged which is usually an indication of an unsure market. The top five stocks were mixed. Cameco closed Friday up 1.0%, Denison closed the day higher by 5.9%, First Uranium closed lower by 3.2%, Paladin closed higher by 6.2% and Uranium One closed the day lower by 13.1%.The best daily performer was Uranium Energy with a gain of 10.97% just edging out Forsys Metals which gained 10.96%. The worst performer, need I mention, was Uranium One with a loss of 13.1%.

There is still no change in the intermediate term dynamics. The Index remains below its negative moving average line and the momentum indicator continues in its negative zone. The momentum seems to be flattening out, possibly preparing for a reversal back to the down side but let’s wait for that to happen. All in all no change in the intermediate term rating, it’s still BEARISH.

The short term is always more interesting as the daily action, even if mild, is quickly reflected here. First the obvious. The Index continues above its positive moving average line and momentum has entered its positive zone. Although the daily action of the Index continues closing on the up side a look at the chart and one can see that it is not going anywhere fast. In fact, it seems to be continuing a topping process and one can almost feel the breeze as it turns downward. Looking at the more aggressive Stochastic Oscillator, here we see the weakness in the Index action. Although the SO is still well in its positive zone the topping activity and downward trend of the indicator is very noticeable. The closeness of the Index to the intermediate term moving average line and the third FAN trend line is an added cause for concern. Although there are lots of warnings here that a reversal to the down side should not be a surprise the indicators have still not reversed and the short term rating must still be considered as BULLISH for now.

As I have been suggesting for some time, although we may be in a rally of sorts this is not yet the time for most speculators or investors to be jumping into the market. This is still a market for the gamblers who understand the risks.