Uranium Stocks Pull Back – Shaking Out Weak Hands

by Olivier on January 11, 2011

The recent pullback in Uranium stocks looks like it is nothing more than a healthy pullback to shake out weak hands. As much as it might hurt when stocks pull back, the recent pullback looks to be a healthy one. As I’ve written a few days ago, the fact we might be in the earliest stage of a potential bull market in Uranium makes it highly likely we witnessed a huge opportunity to add to existing positions or to initiate new positions as opposed to being fearful about a potential top forming. A few other things that make me feel pretty confident about my assumptions is the fact most traders missed the first run-up.

DNN – Denison Mines’ price recovery indicates decent buying pressure. It also validates my assumption entering strong stocks is typically rather difficult as windows of opportunity tend to close very quickly. One more thing that corroborates my bullish assumptions is U.TO’s price behaviour. I anticipated and outlined this price behaviour months ago. The fact U.TO is acting more or less exactly as I thought it would makes me extremely bullish. The reason is simple. Whenever a stock or sector acts as expected I consider to be trading in a ‘flow state of mind’. When stocks ‘act right’ it is the market’s way of telling me to push it. I have 4 Uranium sector overview charts on my public list. The message I want to convey should be unambiguous. I believe Uranium stocks offer outstanding price appreciation potential going forward. As long as the charts act well and as long as I don’t get stopped out I have no reason to change my mind.

The consolidation period in Uranium stocks is most likely not over yet. But with today’s price action odds have increased for it to indeed turn out to be a bullish consolidation period as opposed to being a topping process. Whatever may happen, I let the charts and my stops guide my trading decisions. Not my opinions.

On to a quick portfolio positions chart review:

  • DNN DML.TO – Denison Mines: Today’s price behaviour tells me big money is eager to get in. DNN is starting to be recognized as one of the go to stocks within the Uranium sector.
  • UEX.TO – UEX Corp.: Stock stalled after yesterday’s huge run-up. Another 10% move to the upside and quite a few momentum traders will most likely start to buy in.
  • LNG – Cheniere Energy: Stock is retracing the recent up move. Although I’d love to see LNG rocket higher every single day, today’s breather looks like it is setting the stage for a more sustainable move to the upside. Overall the chart looks very healthy. Price action on the weekly chart is extremely constructive.
  • CNL.TO – Continental Gold: Every gold mining stock was up today. CNL.TO was down. Not exactly happy about that. For now I have no reason to be concerned as volume on the downside is completely drying out. Let’s see what the next few days bring.
  • TMB.TO – Tembec: Relentless buying pressure. No need to over-analyze. Let your winners run.

Trend trading means retaining your initial position through thick and thin. You are fishing for very big fish, and you need plenty of room. One of the reasons so few people make big money from big trends is that they become anxious and hyperactive and forget to hang on. – Alexander Elder

My public list with all my charts can be viewed here:

Buenas noches!

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