Merv's Daily Commentary 06 Jan 2009

After The Close, 06 Jan 2009

Merv’s Daily Uranium Index
Market Data

Open: 150.43
High: 157.58
Low: 142.58
Close: 151.42
Volume: 10059

Note that the volume is an average volume of round lot sales for the 5 0 component stocks. For total volume, multiply by 5000.

The rally continues but looks to be running out of steam. This is to be expected after a sharp move. Any rest period for the Index (and uranium stocks) is expected to be short lived and not too damaging. The previous upper resistance line from the box could now be expected to become a support to any reaction that may come. This would be true for stocks that may have had a resistance that was recently breached. It is often that resistance levels, once breached, become support levels. The reverse is also true for previous supports that become breached.

I just completed developing an Index from the top ten uranium stocks by market value, backdated to the first of 2007. I haven’t yet done any detailed review of the Index but it does look very much like my normal Daily Index. The one slight difference lately was the action in mid-Dec. Where the present Daily Index stayed inside its box the TOP 10 Index had breached its upper resistance level. This might have given us a couple of weeks advance warning of a move in progress, but as I said, I haven’t really had a chance to review it in detail. The other difference is that the TOP 10 Index point and figure chart has broken above its down trend line and is projecting somewhat higher than is the Daily Index. Again, this might have given us that slight advance warning versus the Daily Index. Once I have had a chance to review the TOP 10 Index in detail and finalize its construction I will show it to all interested. The component stocks are the daily five largest plus Denison, Forsys, Fronteer, Mega and First Uranium. Forsys will probably be replaced shortly due to a potential take-over in progress.

The Merv’s Daily Uranium Index closed higher again today with a move of 4.35 points or 2.96%. There were 28 winners, 18 losers and 4 going nowhere. We see the bullishness weakening slightly with these figures. As for those top five, Cameco gained 4.1%, Paladin gained 5.8%, Uranium One gained 4.4%, Uranium Participation lost 1.3% and USEC gained 4.7%. The best winner on the day was Formation Capital with a gain of 33.3% while the worst loser was Titan Uranium with a loss of 17.9%.

Everything in the intermediate term is positive. The Index is well above its positive moving average line. The momentum indicator is very positive and above its positive trigger line. It has also just entered its overbought zone so this is not a time to become aggressive buyers but wait for a possible rest or reaction to take hold and get in at that point. The volume indicator is moving aggressively higher and is comfortably above its trigger line. All in all the intermediate term continues to be rated as BULLISH.

Short term things are the same. The Index is above its positive moving average line. The momentum indicator is in its positive zone above its positive trigger line. The momentum is in its overbought zone and starting to level off. It could turn down with one or two negative days so we should be prepared for a short term reaction soon. For now the short term rating remains BULLISH.

As for the immediate direction of least resistance, well one might say the up side after the action we have had over the past few days. However, the aggressive Stochastic Oscillator has leveled off and is sitting right on top of its trigger line, ready to move lower. There are signs that the upside rally is losing strength although it has not yet reversed. That might not be too long in coming. So, I’ll go with a lateral immediate direction for now.