Uranium’s – Stage IV Capitulations
ChartWorks: published by Institutional Advisors
August 31, 2007
Technical observations of RossClark@shaw.ca
The week ending August 17th brought about numerous capitulation alerts in the uranium sector. We classify these as Stage IV signals when they occur below the 200-day moving average and Stage II when in a rising trend. The Stage IV’s (i.e. CCO.TO 04/03/00) generally need time to form a base before a sustained rally is possible, while the Stage II’s (i.e. MGA.TO 06/12/06) spend little time around the lows.
The normal market reaction following Stage IV alerts is a short-term corrective rally followed by a retest of the lows. The strongest stocks in the sector have now retraced 40% to 50% of the decline from the July high and pushed against their 20-day moving averages. However, most have failed to retrace more than 25% of the sell off.
The volume based indicators (Chaikin, On Balance Volume, Demand Index, etc) can be watched for bullish divergences on the sell off that began today. This will help identify the ones that are moving back into accumulation mode. Stocks that generate a ‘stepped up’ higher low and higher high in the indicators (as seen in CCO.TO) over the next few weeks will likely do the best over the coming months. As of now Cameco stands out as a potential candidate. We will send out updates as others become apparent.
A few examples of recent Stage IV Capitulations
BOB HOYE, INSTITUTIONAL ADVISORS
August 19, 2007
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