Merv's Weekly Commentary, 20 Apr 2008

Merv’s Weekly Uranium Review
for week ending 18 Apr 2008

It looked like we might get a positive week but Friday’s decline put a damper on that. In the end we had a loss both for the day (Friday) and for the week. The losses were small and we’re still trapped inside that “box” that is evident on the daily chart. On the weekly chart we still have the Index trapped inside that wide wedge pattern, a positive pattern. I could draw a more aggressive wedge which could allow an upside break sooner but as yet am not fully comfortable with that more aggressive wedge so I’ll just keep an eye on it but for now not show it.

The Merv’s Weekly Uranium Index closed the week lower by 82.82 points or 1.18%. There were almost twice as many weekly losers as winners with 17 on the up side, 32 on the down side and one stock remaining unchanged. Of the five largest stocks, Cameco gained 1.2%, Denison gained 1.3%, First Uranium lost 0.5%, Paladin gained 4.2% and Uranium One gained 13.9%. The best weekly winner was Azimut Exploration with a gain of 16.7% while the worst weekly loser was Uranium Energy with a loss of 14.2%.

As for Friday itself, the Merv’s Daily Uranium Index closed the day lower by 3.19 points or 1.11%. There were more than three times as many losers on the day as winners. There were only 9 winners, 34 losers and 7 abstaining from any movement. All of the top five stocks by market value closed the day on the down side. Cameco lost 1.4%, Denison lost 3.0%, First Uranium lost 1.9%, Paladin lost 0.5% and Uranium One lost 2.5%. The best mover was Khan Resources with a gain of 11.2% while the worst mover was Titan Uranium with a loss of 9.9%.

I cautioned yesterday about the sharp drop in uranium price. A drop of $3.00 was not a good sign and it put uranium at its lowest level since reaching its high mid-last year. Although I’m not a fundamentalist continuing price deterioration of the price of uranium can’t be good news for uranium stocks. However, stocks usually move ahead of news so the stocks are expected to turn around BEFORE we see a turn around in the price of uranium. At stock market bottoms the two may not be moving together. Of course at some point they would start moving together but the point is that the stocks usually turn around to the up side before the metal. This is also true in gold stocks and most metals. Don’t ask me why, it just happens.

Looking at the weekly Index we see that the Index is still comfortably below its long term negatively sloping moving average line. The long term momentum indicator is also in its negative zone but is moving laterally rather than lower, a minor show of internal strength. For now there is no reason to change the long term rating. It remains BEARISH.

Going to the daily Index for our intermediate term information we see that the Index is still below its negative moving average line but the two are also continuing to close the gap between them. The momentum indicator is still in its negative zone but also still above its positive sloping trigger line. The volume indicator is also still above its intermediate term trigger line. Although things are not all bleak on the intermediate term they are not yet bright enough to change the rating. The intermediate term remains BEARISH.

On the short term the Index has been moving in a basic sideways direction. This causes many changes in the short term ratings and very short term or immediate term direction. These whip-saws are something we just have to live with. They are much more common in the short term ratings than the intermediate or long term. As of the Friday close we have the Index still above its short term moving average line and the line is still very slightly pointing upward. The short term momentum indicator almost reached its neutral line but is now heading lower. It is still in its negative zone but also still above its positive trigger line. The volume indicator is also still above its positive trigger line. On the short term the rating remains BULLISH.

As for the immediate term direction, the Index closed Friday just a hair above its positive sloping very short term moving average line. The aggressive Stochastic Oscillator has moved into the positive zone and well above its positive trigger line. So, despite the Friday drop the immediate term direction is still rated as BULLISH.