Merv's Weekly Commentary, 15 June 2008

Merv’s Weekly Uranium Review
for week ending 13 June 2008

Merv’s Daily Uranium Index
Market Data for Friday 13, 2008

Open: 279.76
Hugh: 285.95
Low: 274.72
Close: 281.46
Volume: 2569

Note that the volume is an average volume of round lot sales for the 50 component stocks. For total volume, multiply by 5000.

Since I last posted a weekly review we have had two weekly declines making it three in a row. It’s been some two weeks since I last posted commentaries and I thought that we might have some significant moves during that time, but no, it was only a slow and steady minor loss after minor loss totaling about 6% or 7% during that period. Now some might think that 6% or 7% is a lot but for uranium stocks this is just a drop in the ocean. About the only sour note is that this slow and steady dribble on the down side has reversed the intermediate and short term ratings back to the down side. So, let’s see where we are this week-end.

The Merv’s Daily Uranium Index closed just a little higher on Friday. The gain was only 0.64 points or 0.23%. There were 20 winners, 22 losers and 8 unchanged on the day. Pretty well a neutral day. Of the five largest stocks we had 2 winners and 3 losers. Cameco gained 1.3%, Denison lost 0.3%, First Uranium lost 1.6%, Paladin gained 1.4% and Uranium One lost 2.3%. The best daily gainer was Pele Mountain with a gain of 8.3% while the worst daily performer was NWT Uranium with a loss of 6.8%. These low best and worst movers just confirms that it was a lack luster day overall for uranium stocks.

For the week as a whole the Merv’s Weekly Uranium Index lost 342.41 points or 4.71%. There were only 11 weekly winners and 39 weekly losers. It must have been that sharp drop on Tuesday that did it. As for the five largest stocks Cameco lost 5.8%, Denison lost 8.6%, First Uranium lost 3.8%, Paladin lost 3.3% and Uranium One lost 7.8%. The best weekly performer was US Energy Corp with a gain of 16.0% while the worst weekly performer was Uranium Resources with a loss of 24.9%.

Now getting to the meat of the commentary. For oh so many months we have been in a long term bear market in uranium stocks. Look at the weekly chart and there is no getting away from it. These past two weeks did nothing to dispel that position. The Weekly Index (as with the Daily Index) remains below its long term moving average line and the line keeps on sloping downward. As for the price momentum, that indicator also continues in its negative zone. For a while there the long term momentum indicator (viewing it on a daily basis) was trying to move higher and was above its positive trigger line for a few weeks but now it is once more heading lower and is below its negative trigger line. The only rating that is possible for the long term is a continuation of the BEARISH rating.

On the intermediate term the Daily Index was above its positive moving average line for a while but on this past Tuesday that changed. The Index is now below its moving average line although only slightly. The moving average itself turned back to the down side on Tuesday and remains so. As for the intermediate term price momentum that continues in its negative zone and is moving lower. It is once more below its negative sloping trigger line. The volume indicator continues to show greater strength than the other indicators and just might be on to something. It is very close to moving above its mid-May highs and is also close to new all time highs. The volume indicator is bouncing above and below its trigger line these past few weeks and is presently above the trigger, which itself is in a positive slope. Although things could change rapidly for now I must still rate the intermediate term as BEARISH.

Going to the short term indicators they are almost all negative. The Index is below its short term moving average line and the line is heading lower. The price momentum indicator is back in its negative zone and moving lower, below its negative trigger line. The daily volume action is very low. Now some may take this as a positive sign but unfortunately it is only natural for investors and speculators to sit back during a negative market. Therefore the trading volume decreases as a natural event rather than a show of bullishness or bearishness. It is when volume increases that one would pay close attention. So what we have is an Index that is rated as BEARISH for now. As confirmation the very short term moving average line remains below the short term line.

Although the aggressive Stochastic Oscillator seems to be bouncing off its oversold line it is still slightly below its negative sloping trigger line. With the Index moving sideways for the past few days the very short term moving average line is sitting right on top of the Index. The two are poised for a turn around in direction but are not quite there yet. The immediate term direction must still be considered as negative but could change on another day’s worth of good upside activity.

I assume that I have a fair amount of fundamentally oriented investors/speculators reading these commentaries, at least occasionally. I can never understand this gambling concept of buying and then holding for dear life expecting to eventually break even or make a few bucks. Look at the two charts. The long term trend changes only occasionally. Isn’t it better to be in the stocks on the way up and sell and sit back relaxing in the way down? I did a daily table and some simple sorting activity of the long term performances. The results should give investors/speculators who buy and hold some reason to rethink their investment concept.

On the long term, over the past 200 days, there are only 4 stocks showing a positive performance. 46 stocks are showing a negative long term performance. This seems to suggest that the long term gambler has only an 8% chance of being into one of these winners.

It should be emphasized that none of these 4 long term winners are stocks that most investors would have considered as conservative investments.

Of the 46 long term losers, the AVERAGE loss is 49%. In other words the average price of these 46 stocks would have to rise over 100% just to break even with where it was 200 days ago. Think about that.

I know this isn’t really fair comparison BUT if you would have sold that average stock 200 days ago and used the capital to buy back today you would have over twice as many shares as you had 200 days ago. Now, if the average price should rise back to its original value you would then have a 100% profit on twice the amount of shares while the buy and hold gambler would just be breaking even with the original amount of shares.

Just something to think about.