Merv's Week-End Commentary 3 Jan 2009

Merv’s Weekly Uranium Review
for week ending 02 January 2008

Merv’s Daily Uranium Index
Market Data for Friday 02 Jan 2009

Open: 124.91
Hugh: 144.05
Low: 123.59
Close: 140.58
Volume: 9192

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

The long awaited event has occurred. My year-end commentary “after the close 31 Dec 2008” finally had the intermediate term rating going BULLISH. The next trading day, 02 Jan 2009, the uranium stocks took off with a bunch of performers going through the roof. On Friday there were no losers. There were 7 of the 50 component stocks with daily performances above the 50% mark. There were 16 stocks with performances over the 30% mark and 34 of the 50 with double digit performances. Boy, you couldn’t ask for a better day. I guess the next question is “What next?” Let’s go through the week-end process and see what we can determine.

The Friday action was great. The Merv’s Daily Uranium Index closed the day with a gain of 16.62 points or 13.41%. Now that’s the kind of daily performance we want to see more off. There were no daily losers and two going nowhere, otherwise all the rest were winners. As mentioned above, the daily winners were mostly of the double digit variety, however, only one of the five largest stocks made it into that illustrious company. Cameco gained 11.9% on the day, Paladin gained 5.4%, Uranium One gained 5.6%, Uranium Participation gained 7.1% and USEC gained 7.8%. The best winner of the day was Uranium Power with a one day gain of 125.0% while the worst performers was a tie between Forsys Metals and Freewest Resources, both going nowhere with a daily performance of 0.0%.

Next, a look at the Weekly Index performance. The Merv’s Weekly Uranium Index closed the week with a weekly gain of 1281.31 points or 59.1%. This looks highly out of proportion to the good performance of the Daily Index. I have, in the past, mentioned that because of the difference in the methods of calculating the two Indices (both have the same component stocks) the Daily Index favors the larger priced stocks which on Friday had the lower performances while the Weekly Index favors the lower priced stocks which had by far the better % performances. For the past week ALL component stocks gained on the week, no losers in the bunch. Cameco gained 21.5% on the week, Paladin gained 21.8%, Uranium One gained 21.2%, Uranium Participation gained 18.9% and USEC gained 20.7%. Just an interesting note but all five of the largest stocks had good weekly performances which were all within 3% of each other, in the worst combination. The best weekly performer was Titan Uranium with a weekly gain of 188.9% while the worst weekly performer was a tie between Forsys Metals and Quaterra, each with a gain of only 3.2%.

As for the weekly analysis, first the long term and the Weekly Index. The Weekly Index is still below its long term negatively sloping moving average line. It will take more than one day or one week to change this rating, but it is heading in that direction. The long term momentum is heading upwards but is still in its negative zone. It is above its positive trigger line although that is not shown on the weekly chart. The long term is still rated as BEARISH for now but if the market continues on its upside direction it wouldn’t be long before this rating starts to improve. HOWEVER, it is still, at this time, BEARISH.

As for the intermediate term, which went bullish on the previous day, it remains so after Friday’s action. The point and figure chart shown here some time back (I’ll show it again sometimes during this coming week) has also broken above its consolidation area and is projecting a move to at least the 300 level, that’s more than a 100% move from here. As mentioned, we are finally out of that “box” with a vengeance. The Daily Index is above its moving average line and the line continues to turn higher. The momentum indicator is not quite into its positive zone but very, very close to it. It is above its positive trigger line and moving higher. The volume indicator continues to show strength and is moving aggressively higher above its positive trigger line. All in all, the intermediate term rating continues to be BULLISH.

On the start term things couldn’t be more positive, after Friday. However, the more positive it is the closer it is to a top of some sort. I would not be surprised to see a little pull back in the stocks and Index after the Friday and week as a whole action. However, any pull back that might happen is not envisioned, at this time, as being of a serious nature. Such pull back would be a good opportunity to buy at slightly lower prices. The Daily Index continues to move higher above its positive sloping short term moving average line. The momentum indicator is very positive and has entered its overbought zone suggesting that a rest or reaction should not be a surprise. The daily volume activity reached a low point just before Christmas but ever since has been steadily improving with the upside Index. The short term can only be rated as BULLISH.

As for the immediate direction of least resistance, that would naturally be to the up side after such a sharp break above the box. The aggressive Stochastic Oscillator (SO) is also in its overbought zone so a reversal would not be unexpected, but during a sharp move the SO could stay in the overbought zone for some time. Wait for it to turn around and move below its overbought line before thinking seriously that a reaction is upon us.

Readers to this blog and long time clients to my precious metals service (see left side of front page for a link) know that the time period that I prefer is the intermediate term. It is less likely to provide whip-saw activity versus the short term and it gets one in relatively early in a stock move versus the long term. Over the next day or two I hope to show some interesting uranium stocks with a brief intermediate term analysis (maybe a short term, I haven’t decided yet). With the recent activity it will be hard to sort out a few, there are so many now.
Check back Sat evening and during the day Sunday.