Trader’s Narrative

It would seem that the stealth uranium bull market is over. After spending the past few years levitating non-stop into the stratosphere, uranium (U₃O₈) prices finally succumbed to gravity in June, topping out around $135/lb.

Since then prices have dropped to $90/lb (not shown on graph above). The effect on uranium stocks has been nothing short of devastating.

The Uranium Participation Units (TSE:U) traded on the Toronto Stock Exchange have dropped from almost $19 to $10. And whereas it used to trade at a premium to uranium spot price (sometimes as high as 50%!), not it is trading below NAV.

The last net asset value was July 31st at $14.04 - the August 31st numbers are still to come but I estimate them to be lower than July’s.

And while before it had bounced off it’s 50 day moving average, now it is below both the 50 day and the long term, 200 day moving average.

So what happened? I have no idea really. But I suspect it has something to do with demand and supply

Also, we had a rare contrarian indicator occur in early summer. At the beginning of May 2007, NYMEX started trading a new futures contract. Here’s what I wrote back then:

Historically, the introduction of a new contract has usually meant an intermediate high in prices…If you’re long uranium or uranium stocks though, we could be in for a rough patch as this is a reliable contrarian indicator.

As you can see on the chart, that coincides almost exactly with the top in Uranium Participation. Uranium itself hovered in thin air territory for another month or so:

I don’t like how most uranium stocks have cratered below their short term and long term moving averages. This sort of damage, especially when wrought over a short period of time isn’t at all conducive to the health of a bull market.

The only good thing I can see on the charts is that they are back at support (as you can see with the chart of Uranium Participation Units above).