Merv's Weekly Commentary 30 Jan 2011

Merv’s Weekly Uranium Review
for week ending 28 January 2011

Merv’s Daily Uranium Index
Market Data for Friday 28 Jan 2011

Open: 250.78
High: 257.67
Low: 246.02
Close: 252.43
Volume: 9797

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.

I think I’ll start off by answering a question put to my by a reader. I copy the concern here:

I have a question about the Merv Weekly Uranium Table. I have a question about the short term, intermediate, and long term ratings that are rated as negative and positive. If one stock is rated as positive and another is rated as negative for the short term does that mean the stock that is rated as positive for the short term has a better chance of performing in the short term from a technical perspective. Or does it mean that the ratings that are positive have historically done better and are not a technical indicator for future performance.

I think that many readers to these commentaries might have the same question. The first thing to understand is how the ratings are derived. The ratings are basically derived from the technical information calculated in the tables. You will appreciate that the method of deriving the final ratings from this information is proprietary. Since the technical information is based upon historical data for the respective time period, the rating is therefore also a rating that reflects this time period information. What you have is the rating TODAY based upon the historical information for each time period up to today (or week).

What the rating IS NOT is a prediction of the expected performance for the stock over the next short, intermediate or long term.

If you have one stock rated as POS while another stock is rated as NEG then you know that the first stock is trading today in a positive direction while the second stock is trading today in the negative direction, for the time period in consideration.

The following week with updated technical information the ratings could change so one must follow the ratings week by week from a POS to a NEG rating if one is using the ratings in their investment strategy.

The primary criteria here is the technician’s code: a stock in motion remains in motion until verified to the contrary. So, a POS stock remains in a positive direction until the rating changes to a NEG. As mentioned, that could be tomorrow or in several months.

N, + N and – N ratings are various levels of neutral ratings and most often are stepping stones as a stock trend may be in the process of changing from a POS to a NEG rating or the other way around.

Although there are techniques to assess which stock has the best chance of moving in the direction of a signal I know of no technique which will predict which stock will outperform any other stock, at least no technique with a good record.

I hope this answers the question and I have not confused you too much.

Back to the real world. The Merv’s Daily Uranium Index closed on the up side on Friday with a gain of 0.88 points or 0.35%. There were 27 winners, 19 losers and 4 stocks not part of the game. Cameco gained 3.6%, Denison lost 1.2%, Extract gained 1.6%, Paladin gained 0.4% and Uranium One gained 3.1%. The best daily winner was CanAlaska with a gain of 11.0% while the loser of the day was First Uranium with a loss of 15.4%. Market Vectors Nuclear Energy ETF lost 1.5% while Global X Uranium ETF lost 1.7%.

For the full week the Merv’s Weekly Uranium Index lost 258.83 points or 2.47% while the Daily Index lost 0.47% for the same period. There were 15 weekly winners, 35 weekly losers and all stocks were in the game. Cameco gained 5.8% on the week, Denison gained 0.3%, Extract lost 0.8%, Paladin lost 2.6% and Uranium One gained 6.0%. The best weekly winner was Strateco with a gain of 22.6% while the loser of the week was Pele Mountain with a loss of 34.4%. Market Vectors Nuclear Energy ETF lost 0.2% while Global X Uranium ETF lost 1.7%.

The long term continues to be in no danger of reversing its direction so I wouldn’t spend any time on it this week. The long term rating remains BULLISH.

As for the intermediate term things are slowly heading toward a possible reversal. The Daily Index closed above its positive sloping moving average line but not that much above that a person can get complacent. The momentum indicator remains in its positive zone but heading lower and is below its negative sloping trigger line. The indicator has been progressively getting weaker and weaker and as a reader pointed out, this is a negative divergence between the indicator and the Index trend. As for the volume indicator, it is moving in a very, very slight upward direction and remains just above its positive sloping trigger line. All in all the intermediate term rating is still considered BULLISH but getting weaker. The short term moving average remains above the intermediate term average for confirmation of this bull.

On the short term the topping activity is taking more of a toll. The Daily Index has closed below its negative sloping moving average line. The momentum indicator is toying with its neutral line and closed on Friday just above the line. It also closed very, very slightly above its trigger line although the trigger is still sloping in a negative direction. The daily volume activity has been basically neutral during the recent past and not giving us any story. For the short term the rating is BEARISH but in a very slight improving mode. The very short term moving average line remains below the short term line for confirmation of this rating.
Now, for the immediate direction of least resistance, that is anyone’s guess with what is going on in the Middle East. However, the direction looks more likely to go higher than lower looking at the action of the Stochastic Oscillator.