Merv's Daily Commentary 18 July 2010

Merv’s Weekly Uranium Review
for week ending 16 July 2010

Merv’s Daily Uranium Index
Market Data for Friday 16 Jul 2010

Open: 149.15
Hugh: 150.05
Low: 145.55
Close: 146.41
Volume: 5537

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

Note that additional charts of the Daily and Weekly Indices were posted earlier and should be viewed during this commentary.

So, there I was Friday morning reading the daily financial paper and all that good stuff about uranium. It looked like China, along with India, is almost cornering the market for uranium. The price was going to shoot up 200% say some knowledgeable industry sources. We are going to fall all over those 10 baggers that will litter the streets. What, oh what could go wrong?

So I says to myself “myself, what could go wrong? And myself answers, well, the stocks could go into a miserable plunge with all this good NEWS”. You could seldom go wrong by selling on the good NEWS. What happened on Friday? The Merv’s Daily Uranium Index dropped 2% on all that good NEWS. What we now need is some bad news. Oh yes, uranium did decline slightly this past week but maybe we need more of a decline before speculators decide that the end was in sight and start to “bottom fish”.

Today’s chart shows us a downward sloping channel with the Daily Index reacting from the upper resistance line and from the intermediate term moving average line. Are we destined to move all the way to the lower support line? I don’t think so. The momentum indicators (short and intermediate term) seem to suggest that the momentum has been shifting recently towards the improving side. The short term indicator moved into its positive zone this past week for the first time in three months and the intermediate term indicator had moved above its previous three short term rally peaks. So, the signs seem to suggest that the momentum is to the up side although not a steady continuous upside. There will always be pot holes in the road (I live in the Montreal area and you can never avoid them). Although volume is often a lagging indicator at market tops one DOES want to see the volume pick up at market bottoms. This would be a suggestion of the speculators getting back into the market. So far the volume is perking up on the occasion but unfortunately not always on the up side. So, we have some conflicting indicators that need to be resolved soon.

The Merv’s Daily Uranium Index closed on Friday with a loss of 2.95 points or 1.97%. There were 14 winners, 25 losers and 11 stocks just sitting there. Cameco lost 1.8%, Extract was just sitting there, Fronteer lost 2.6%, Paladin lost 2.7% and Uranium One gained 0.7%. The best winner of the day was Kivalliq Energy with a gain of 10.0% while the loser of the day was Crosshair Exploration with a daily loss of 12.9%. Market Vectors Nuclear Energy ETF lost 3.1% on the day.

For the week as a whole the Merv’s Weekly Uranium Index gained 99.31 points or 2.55% (the Daily Index was up only half as much for the week). There were 29 weekly winners, 17 weekly losers and 4 stocks just sitting there. Cameco gained 7.3% on the week, Extract gained 7.5%, Fronteer lost 4.3%, Paladin lost 0.6% and Uranium One gained 2.9%. The best weekly winner was Bannerman with a weekly gain of 39.6% while the worst weekly loser was Strateco with a weekly loss of 10.9%. Market Vectors Nuclear Energy ETF lost 1.3% on the week.

From a long term perspective both the Daily and the Weekly Uranium Indices are still a long way off from turning around to the up side. Both are well below their negative moving average lines, both have their long term momentum indicators in the negative zone and the volume indicator for the Daily Index remains below its negative sloping trigger line. Both Indices are therefore rated as BEARISH.

On the intermediate term things are getting pretty close to a trend reversal but not quite yet. As mentioned above the Daily Index has been touching the intermediate term moving average line but could not close above it. The line itself is still heading lower. The momentum indicator had been moving towards its neutral line but still has a way to go. It remains in its negative zone but still above its positive sloping trigger line. The volume indicator is showing some strength but could be a little stronger on the up side. It had moved above its negative sloping trigger line but on Friday dropped back below the line. All in all the intermediate term must still be rated as BEARISH. The short term moving average line is still comfortably below the intermediate term line for confirmation of the bull.

On the short term things are still somewhat brighter but Friday has put a damper on things. The Daily Index is still above its positive sloping moving average line but moving lower rapidly. The momentum indicator had been in its positive zone during the week but dropped into the negative zone on Friday. It does remain just slightly above its positive trigger line. As for the daily volume action, Friday was a bummer with reasonable volume but on the down side. For now my rating is still BULLISH on the short term but another day of the downside and that may start to change. The very short term moving average line is still above the short term line for confirmation of the bull.

As for the immediate direction of least resistance, I guess I’ll have to go with the down side. The Stochastic Oscillator had been in its overbought zone but has now dropped below the overbought line and is heading lower. The Daily Index has also moved below the very short term moving average line so the direction of motion seems to be to the down side.