Yesterday, we said that we identified uranium mining stocks as our number #2 top play for this summer. In this article we showed the URA ETF with a beautiful bottoming pattern. Admittedly, we got concerned once URA broke below $15 two months ago. However, in the meantime, something happened which we did not see coming, and we will explain in this article what that is and why investors better pay very close attention to uranium mining stock UEC.
First, URA ETF saw a breakdown in May. In June, uranium stocks did something that is quite exceptional: it started a beautiful bottoming pattern and tested its breakout trend line (see the uranium stocks chart here). This is what we wrote yesterday: “Not only is June’s bottom a higher low compared to the ones of January and October 2016. More importantly, we just got a confirmation of the breakout, see the purple circle (the one right above the trendline). The breakout is now confirmed, and we interpret this as a new bull market in uranium miners!”
Second, as always, it pays to identify the sector leader, as that is the stock that tends to lead the space: if it goes higher while other stocks in the sector are lagging it suggests that the whole sector will rise sooner rather than later.
The sector leader in uranium stocks is Uranium Energy Corp (symbol UEC). Its chart is embedded below. The chart has some very interesting findings, and the fundamental story of this stock is important for the sector:
- The chart shows how the stock has two distinct areas (or channels) in its bear market. Area 1 is the bearish channel while area 2 is close to the resistance level (potentially more bullish). As seen, UEC is doing something that it has not done before: it is trading for half a year in “area 2”. During that time it tested the trendline that sits in between both areas. This looks very bullish, and there is a fair chance on a breakout.
- Fundamentally, UEC is an important uranium stock because it has a very smart strategy: it has accumulated uranium in the last years (since the bear market begun) with the intention to sell it once prices turn higher. That is very smart to say the least. It also suggests that UEC should be able to ‘sniff’ higher prices, making it a leading indicator for the space.
Now here is where it becomes interesting: the price of uranium seems to be bottoming, see the chart to which we linked where readers can spot a higher low. The fact that UEC is acting strongly could be a confirmation of higher uranium prices.
As a conclusion we would say that a combination of URA crossing $15 (Uranium Stocks At $15 Has Huge Implications) as well as the uranium stock sector leader UEC breaking above $2.00 would be the ultimate confirmation of a new bull market in uranium stocks.
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