

Merv’s Weekly Uranium Review
for week ending 10 October 2008
Merv’s Daily Uranium Index
Market Data for Friday 10 Oct 2008
Open: 103.01
Hugh: 111.68
Low: 92.09
Close: 102.71
Volume: 7747
Note that the volume is an average volume of round lot sales for the 50 component stocks. For total volume, multiply by 5000.
Another day and another decline in the uranium stocks. I’m starting to get a complex of some sort. I write commentaries about gold and uranium stocks. Gold stocks have sure seen better days and uranium stocks seem to be dropping like rocks if you look at the Weekly Index. Maybe if I stopped writing about these stocks things will perk up.
Looking at the Merv's Weekly Uranium Index we see the old tale that things drop a lot faster than they go up. The Index is now about where it was 4 years ago. However, it took almost 2 ½ years to get to the top and only 1 ½ years to come back down. I read all these articles about what a great future uranium has, with all those nuclear power plants being built in china, and such. But the price of uranium keeps dropping to new bear market lows and so are the stocks. The only consolation is in being a technician and not worrying about what the fundamentals have to say. Speculators a lot smarter than I are moving the market with their money so why should I worry that the direction is not what fundamentals might suggest. GO WITH THE FLOW.
One of the biggest mistakes “investors” are inclined to make during a bear market, especially one that they don’t think should be happening, is in trying to pick the bottom. Yes, if you keep trying then somewhere along the way you will get the bottom. BUT, again looking at the Weekly Index, how many times have you guessed the bottom and missed? In my way of thinking it’s better to wait for the bottom to be reached and confirmed by a new bull trend in motion before jumping back into this market. The Index may have already dropped 85% but FROM HERE it could drop another 50% with no effort, and from there another 50% and only get to where the Index was at the beginning of 2004. RELAX and wait for the turn.
The stocks dropped another notch on Friday. The Merv’s Daily Uranium Index closed lower by 5.52 points or 5.10% on the day. There were 11 winners, 36 losers and 3 unchanged. As for the five largest stocks by market value, Cameco lost 10.9%, Denison lost 3.5%, Paladin lost 3.4%, Uranium One lost 12.5% and USEC was the one bright spot on the day with a gain of 16.3%. It was the best winner of the day while the worst loser was East Asia Minerals with a loss of 33.3%.
For the week. You don’t want to know. The Merv’s Weekly Uranium Index closed lower by 949.46 points or 29.75%, WOW. There was only one winner on the week, 48 losers and one going nowhere. The five largest stocks did not have such a good time of it either. Cameco lost 28.1% on the week, Denison lost 37.2%, Paladin lost 41.7%, Uranium One lost 51.6% and USEC lost only 3.6%. The best weekly performer was that one winner, Altius Minerals with a gain of 0.8%, boy! Champagne time. There were several losers above the 50% mark, the worst was Nuinsco with a weekly loss of 58.8%. Just think, because of this one week Nuinsco would have to gain about 140% just to get back to where it was last Friday.
Looking at the weekly Uranium Index Table this week all three time periods have zero % of their stocks in bullish trends while all three time periods have over 90% in bear trends. You’d almost think we were in some kind of bear market. The Index remains below its negative sloping long term moving average line and the long term momentum indicator is well entrenched in the negative zone. Although not shown on the chart the indicator is below its negative trigger line. It has also just entered its oversold zone so we might have more than usual justification for expecting the down side slide to stabilize and maybe even reverse. However, let’s wait for it. In the mean time the long term rating remains BEARISH.
On the intermediate term nothing much has changed from the ratings standpoint for some time now. The Index remains below its negative moving average line and the momentum remains deep in its negative zone below its trigger line. As with the long term indicator, the intermediate term indicator has also moved into its oversold zone and one may start to expect some kind of stabilization or even a rally. A few days back I showed the On-Balance Volume indicator and mentioned how the volume is often a lagging indicator at market tops (the reverse of what you might often hear). It had just broken below a two year support level. Since then it has been in a plunge mode falling further below that support level. The only rating possible for the intermediate term remains the BEARISH rating.
On the short term the Index continues to move ever lower into new bear market lows, BUT it just doesn’t seem to be enthusiastic about it. This is not technical but looking at the Index action over the past few days it just looks like the Index has been moving lower due to sympathy with the overall markets rather than anything concrete about uranium. Yes, I know, the uranium price made another new low this past week but the stocks would normally turn around PRIOR to the turn in the commodity. In any case, feelings do not move stocks, money does and it still looks like the money is to the down side. The Index remains below its short term moving average line, the indicator remains in its negative zone and below its negative trigger line. Interesting fact is that the indicator and trigger line are now converging and not moving apart. The indicator is also deep inside its oversold zone and possibly ready to reverse. Just looking for some comfort here. However, based upon the indicators at this time the short term can only remain rated as BEARISH.
As for the direction of least resistance, I may be going out on a limb here. Although the Index did make new lows on Friday and remains below its negative very short term moving average line the close looked more like a neutral daily activity than a negative one. In addition, the Stochastic Oscillator, which had been in its oversold zone, had turned up on Wednesday and moved above its oversold line on Friday. This suggests a very short term strengthening in the internal strength of the Index action. It may even be the start of the Index stabilizing and starting a rally. We’ll just have to see what the next day’s action will bring. I am going out on a limb and considering that the Index is ready for a rally and the direction of least resistance has turned to the up side.
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