for week ending 20 January 2012
Merv’s Daily Uranium Index
Market Data for Friday 20 Jan 2012
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 Indices were posted earlier and should be viewed during this commentary.
Maybe I should stop posting all together. No sooner did I decide to retire and only post occasionally the uranium stocks decided to take off on a good old fashioned bull run. Since the low just after Christmas (on Dec 28th) the Daily Uranium Index has advanced almost 26% to the Friday close. Most of that advance has been in the past two weeks with a 7% rise the previous week and a 12% rise this week. The Weekly Index gained 36.9% during this same period. Gee – if I stay retired maybe we will see another 100% move very soon? As they say, timing is everything.
Although it has been a few weeks since the last post let’s pretend that we never left and go right into the normal week-end routine. As most readers already understand, the two Indices tell us a very similar story but from two different aspects. The Weekly Index focuses on the performance of the low priced (speculative) stocks while the Daily Index focuses on the high priced (quality) stocks. Although their performances are similar there are some subtle differences, which I will try to remember to highlight as I go through the routine.
The Merv’s Daily Uranium Index closed on Friday with a daily decline of 0.65 points or 0.42%. There were 18 daily winners, 27 losers and 5 stocks hiding somewhere in the bushes. Cameco gained 0.3% on the day, Denison gained 3.2%, Paladin lost 2.6%, Uranium One lost 2.5% and Uranium Participation gained 0.5%. The best daily winner was Vena with a gain of 19.0% while the loser of the day was Uracan with a loss of 15.0%. Market Vectors Uranium + Nuclear Energy ETF gained 0.2% while Global X Uranium ETF lost 1.8%.
For the full week the Merv’s Weekly Uranium Index gained 839.66 points or 18.3% (the Daily Index rose 11.9% on the week). As we see it has been the speculative stocks that have really been moving lately. There were 49 weekly winners, zero weekly losers and one stock hiding somewhere. Cameco gained 12.8% during the week, Denison gained 21.7%, Paladin gained 20.4%, Uranium One gained 17.3% and Uranium Participation gained 5.6%. The best weekly winner was Vena with a weekly gain of 86.5% while the worst weekly performer was East Asia which closed the week with a zero gain or loss. Market Vectors Uranium + Nuclear Energy ETF gained 7.5% and Global X Uranium ETF gained 13.5%.
Looking at the long term (weekly) charts we see a slight difference in the performance of the two Indices. The Daily Index had shown greater weakness than the Weekly Index by moving below its previous 2010 low while the Weekly Index made a valid double bottom versus its 2010 low. Usually one would call a double bottom a valid one when the Index moves above its high level in between the two lows BUT that high is so far away that one may take this as an exceptional exception to the rule.
Trend: Both Indices have moved above their long term moving average lines but only the Weekly Index moving average line has already turned to the up side. The Daily Index long term moving average line is in its turning process but not quite there yet.
Strength: The long term momentum indicators for both Indices are on the rise but closed the week just below their neutral levels still slightly in the negative zones. Both indicators are, however, above their respective positive sloping trigger lines.
Volume: The Daily Index volume indicator (I have no volume for the Weekly Index) is now at a four month high and above its positive sloping trigger line.
Putting all that together I just can’t quite get a full bullish rating yet for the long term. The resulting ratings for both Indices is a + NEUTRAL rating, one level below a full bull.
Both Indices have provided us with an intermediate term double bottom pattern (early Oct versus late Dec), however, only the Weekly Index has confirmed the pattern by moving above its high in late Oct. That double bottom projects the Weekly Index to the 6040 level, which is not that far away.
Trend: We see on a previously posted chart that the Daily Index made a very nice break above its intermediate term down trend line (which was also the upper resistance line in a downward sloping channel). The Daily Index is also above its positive sloping intermediate term moving average line.
Strength: The intermediate term momentum indicator has now moved into its positive zone and remains above its positive sloping trigger line.
Volume: The volume indicator continues to show strength and is above its positive sloping trigger line.
On the Intermediate term the rating is now BULLISH. This is further confirmed by the short term moving average line moving above the intermediate term line.
The short term move has been pretty strong this time, stronger than the move in October. The question is “will it last?). I’ll try to answer that question at the end of this commentary.
Trend: The Daily Index is above its positive sloping short term moving average line. The recent trend has been very strong and one can expect some rest period ahead.
Strength: The short term momentum indicator has been on the rise for three weeks now and had entered its overbought zone the other day. It seemed to have reversed direction and closed on Friday just a hair below its overbought line. However, it is still above its positive sloping trigger line.
Volume: The daily volume action has finally started to show some life recently. One lesson in volume analysis has to do with the increase in volume during a price advance. It is bullish when volume is increasing as the advance in price is taking place. However, one thing to watch out for is heavy relative volume action after the price has gone through a significant advance. Such heavy volume suggests that the advance is about to stall. This is what we are seeing here in the volume action this past week. The stall may be temporary or longer term, no one can tell at this point but a stall of some sort is about to happen.
For now the short term rating remains BULLISH, confirmed by the very short term moving average line remaining above the short term line.
WHAT TO DO?
It looks like we may be at an early period of a new bull market in uranium stocks. The operative word here is “looks like”. This is the time that one can make the greatest profits in stocks but at the same time it is the most risky time to be jumping in. We get several bottoms and starts of new bull moves before we finally get the real one. Is this the real one or just one of many false starts? One cannot really tell so you make your choices and takes your chances. If you should decide to jump in at this time then be sure you have an aggressive exit strategy just in case this is a false start. Holding stock that is not moving, or worse, that is moving lower is not the way to capital gains. It’s better to be holding the cash waiting for the right move and possibly losing a little potential profit in exchange for lower risk. You know your own investment or speculative criteria.