Yesterday, readers of my premium newsletter, Gold & Commodities Stock Trader, were sent an update. One I think could be so beneficial to them, I feel I must share it with you also. The uranium market is heating up, and there’s two players — listed right here on the ASX — that could hit the big time, should things play out as I expect. Obviously, I won’t be naming those stocks here, as my readers have paid for those recommendations. But what I can share with you is the analysis of the uranium market that helped lead to them.
I believe ― rightly or wrongly ― it’s time to own uranium stocks. The spot price keeps moving higher, with the overall sector lagging. It reminds us of vanadium and cobalt back in the day.
When we tipped both sectors, the market wasn’t paying attention to the technology advancements or the spot price.
It ignored the developments.
We were perplexed.
Our readers were probably shocked, as well.
Winding back the clock
For example, we tipped vanadium in Resource Speculator during April 2017 (a newsletter no longer operating). The vanadium price was going through the roof and almost no one was talking about it.
The companies we tipped did nothing for months…
Fast forward to earlier this year and market sentiment had changed.
The same thing happened to cobalt during early 2016. We tipped the base metal, just as it was breaking out into a bull market. Similar to vanadium at the time, there were three cobalt stocks on the ASX. In both cases, the market wasn’t interested in the sectors until their spot prices were skyrocketing.
That’s possibly because we’re still in a resources bear market…
That said, even in this poor environment, the market can only ignore a surging price for so long. Eventually the market says, ‘OK, maybe this is the real deal and not a false move…I should get involved’. Traders jump on the bandwagon and retail punters ― who only buy what’s going up ― join the party, sending share prices through the roof.
Uranium is nearing that lift off point…
Here’s the latest price chart:
The uranium spot price is setting two-year highs and has rallied to major resistance at US$28 per pound. That’s where the last level of defence exists, shown by the top pink horizontal line. If the spot price closes above that level on a monthly basis, uranium could see a gigantic move to the upside.
Look at the large price bursts above that level on the chart, for example.
Now there’s no guarantee the next phase of the rally will start today, tomorrow or any time soon. We might get a technical retracement off last-level resistance. In other words, a monthly closing above US$28 per pound might not be sustaining. Uranium could still trade sideways or pull back towards support to ‘shake’ the bulls into year’s end.
Financial markets are full of surprises.
That said, given the recent price developments, we’re bullish…
It’s a tough resources market.
But, as discussed above, we have seen this price action happen many times in the past. If we’re correct, it’s pretty obvious what happens next.
Looking at the above chart, we can see a major gap above US$28-$30 per pound. I believe this gap is key. A technical closing above US$30 per pound should see more institutional and high net wealth money move into uranium stocks.
That’s when the fun should start…
A technical closing above US$30 per pound could see a sharp rally to US$34 and a closing above US$36 could trigger a burst to $40 per pound. Keep in mind, while the market doesn’t expect it to happen today or tomorrow, this price action could play out quickly.
The bottom line: Trade the trade. Uranium looks bullish on the charts and remains a standout performer in the commodities sector. So, while we could see a slight pull back around these levels, the party looks to be just getting started. Uranium could take off to much higher prices in the months ahead. I believe this is the time to buy uranium stocks, before the train leaves the station.
To find out my favourite tips in the uranium sector, check out Gold & Commodities Stock Trader here.
Resources Analyst, Gold & Commodities Stock Trader