Uranium Sector Erupts – Four Must See Charts
What is it about the month of November for the uranium sector? In 3 of the last 4 years the uranium sector has erupted from ugly downtrends in early November:
URA (Daily – 5 Year)
It’s still early for this month of November, however, URA’s upside move this week is already the strongest rally from an oversold condition (to an ‘overbought’ condition), in such a short period of time (4 days), in the history of the URA exchange-traded fund.
Cameco Corp’s (NYSE:CCJ, TSX:CCO) decision to suspend production from the world’s largest uranium mine, McArthur River, sent shockwaves throughout a downtrodden sector. After reaching what was arguably the most depressed sentiment in the history of the uranium sector just last week, uranium investors now have hope that the depressed U3O8 spot price will begin to rise – according to BMO the uranium market suddenly faces a much greater than previously forecast under-supplied condition in 2018:
The market cheered Cameco’s decision to not only shutter production at McArthur River but to also reduce its dividend by voraciously bidding Cameco shares higher after an initial opening gap lower:
Since reporting disappointing earnings on October 27th Cameco shares have seen steady accumulation, and today’s lower-to-higher reversal is a strong sign that institutions are beginning to bet on a turn in the uranium sector.
The premier uranium exploration stock, NexGen Energy (NYSE:NXE, TSX:NXE), staged a ~25% rally on the Cameco news:
Today’s move in NXE is particularly significant from a technical standpoint as NXE broke out to the upside from a large multi-month descending triangle by way of an opening gap (trend line breaks by way of gap carry greater significance). Moreover, NXE shares closed near session highs on the heaviest trading volume since March.
NXE faces some minor resistance near C$3.10, however, today’s price and volume action offers a strong probability that an intermediate-term low has been put in place and a new leg higher has begun. The all-time high at C$4.45 would be considered a minimum upside objective for this next leg higher.
Disclosure: Author is long CCJ and NXE shares at time of writing and may buy or sell at any time without notice.
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