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Update of Oils Versus Uraniums

from ChartWorks:: published by Institutional Advisors

Bob Hoye
Technical observations of RossClark@shaw.ca
November 21st, 2005

We are in the time window where the uranium stocks can be anticipated to outpace the oils. Using Cameco (CCJ, CCO.TO) data from 1991 compared to the XOI index it is readily apparent that the ratio finds a low in the last two weeks of September through the first ten days of October. From there Cameco outpaces on the upside for the next twelve to sixteen weeks. In six of the past fourteen years the rally extended well into the first quarter of the following year.

There were only two instances where Cameco did not outperform the XOI coming out of a late September low (1996 & 1999). These were also the only years in which the ratio broke support after the 15th of October, so this becomes a reasonable stop loss point. A basket of junior uranium’s will likely outperform Cameco, just as a basket of junior oils may outperform the XOI. Corrections in the uranium’s provide buying opportunities. The use of the Commodity Channel Index (CCI) can be of value in such cases. Readings in the CCI(8) below -100 can serve as timely entry points. The following link from www.stockcharts.com may be helpful for monitoring the index: http://stockcharts.com/def/servlet/SC.web?c=CCO.TO,uu[w,a]daoanyay[pb200!c50][vc60][iLd8]&pref=G

Only a few in the sector have consistently good volume, so be careful about overweighting in the smaller issues. Names to watch can include: Cameco (CCO.TO), Denison (DEN.TO), Fronteer (FRG.TO), Forum (FDC.V), Mega (MGA.V), UEX (UEX.TO), Int’l Uranium Corp (IUC.TO), JNR (JNN.V) and Laramide (LAM.V).

The 50-week moving average (currently $55.60) continues to be a reasonable spot to expect support in crude oil. Once the CCI(20) reverses back above zero we’ll have a good confirmation that the bottom is in place.

As anticipated, natural gas also continues to outpace crude oil. My two favorite natural gas royalty trusts, Shiningbank (SHN/UN.TO) and Paramount Energy (PMT/UN.TO) are trading at new five week highs.

Traders can look for an optimum exit once the daily RSI reading moves up through 70.

Bob Hoye
November 21st, 2005

EMAIL:: bobhoye@institutionaladvisors.com
CHARTWORKS WEBSITE:: www.institutionaladvisors.com

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