The ‘Glow-In-The-Dark,’ Post-Fed Hike Play

The big news this week was the Fed quarter-point rate hike. But that’s not all.

After Janet Yellen & Co. spoke, a funny thing happened …

Rather than cause a rise in bond yields and the dollar, and a decline in stocks, the first of what looks to be several rate hikes this year caused bond yields and the dollar to fall, and stocks to rise.

The fall in the dollar also caused a bump in dollar-denominated precious metals such as gold and silver, and in industrial metals such as copper and uranium.

Today, I set out to write a bit about copper and uranium. After all, both are not only benefiting from the dollar dip, both also from the recent boost in economic growth along with the likelihood of a "yuge" President Trump infrastructure spending bill.

But before I could dig into the details of copper and uranium, our newest editor, Sean Brodrick, grabbed the reins and decided to go full gallop on the latter.

Sean’s analysis was so strong, and his enthusiasm so robust, that I decided to let him run with the topic.

Now, originally, I just wanted Sean to provide a "chart of the day" in this publication. However, because today’s chart and commentary complemented this topic, it only made sense to run it in its entirety here.

Hey, a good leader knows when to let his troops take the lead, and that’s what I am going to do today.

So, take it away, Sean …

Sean Brodrick in the mines, and holding a uranium core sample

Mining for Money:

Chart of the Week Glows in the Dark

By Sean Brodrick

Gosh, not very long ago, it sure seemed like the uranium market was dead. 2016 saw uranium prices crumble to 12-year lows. Today, prices are off that bottom, but only a little.

It’s so danged bad that Kazakhstan, source of 30% of the world’s uranium supply, is cutting its own production by 10%.

Nobody undercuts the Kazakhs on price, so that’s the equivalent of a B-movie atomic-powered monster doing a face-plant. Game over, man!

Meanwhile, the guys who run uranium mining companies have been promising me that prices would rally — any week now — for three years. THREE. LONG. YEARS.

Yeah, you could say I’m a bit disgusted with the uranium industry.

Well, lo and behold. That atomic-powered monster is rising from the rubble and coming back for a sequel. Take a look at a chart of the Global X Uranium ETF (URA).

This chart shows that URA rallied big since November. In February, it started pulling back. That consolidation brought it back to nearly a 50% retracement of the big move.

If you read JR Crooks’ fine stuff, you know that 50% is a common Fibonacci retracement. It’s often tested before a stock or fund takes off again.

Now, URA has clawed its way back above its 50-day simple moving average. This can be seen as a dividing line between bullish and bearish movements.

Finally, on the bottom of the chart, I’m using a momentum indicator called the "Force Index." It’s one of my favorites.

Here’s why: Just like in Star Wars, you want someone who is strong in the Force. URA’s Force Index just switched from bearish to bullish — from the Dark Side to the Light Side, if you will. Momentum is with the bulls on this one.

So what is the URA ETF anyway? This is a basket of leading uranium producers and explorers, including Cameco Corp. (CCJ), NexGen Energy (NXE), Uranium Energy Corp (UEC) and 23 more. The URA even has the Uranium Participation Corp. (U) which holds physical uranium hexafluoride gas, among its components.

That’s a glow-in-the-dark lineup.

Now, you could buy one of those individual miners. Heck, I do it. But the beauty of the URA is you get plenty of upside without single-stock risk.

What am I talking about? Well, do you want to see a picture of a heart attack on the trading floor? Let me introduce you to Cameco, North America’s biggest uranium producer …

You can see that in January, Cameco suffered a one-day, 18.5% drop. It recovered most of that. But then it careened into a 19.5% drop. Again it recovered. Then it went into a "Slope of Nope."

By that, I mean, "You gonna buy a stock sloping like that?"

"Nope."

Now, this is not Cameco’s fault. Some events are beyond its control. Japan suddenly decided it was going to break long-term uranium supply contracts. Ding-dangity dang it!

But at this point, if you’re trading Cameco, the odds are better than average that you’re a masochist.

Cameco is a well-run company, and I’m sure it will be a good buy once it looks like it will put its troubles behind it.

Now go back to that chart of URA. Sure, it had a bumpy start to 2017. The whole industry was riding like an old Ford with bad shocks. But URA’s ride was much smoother than the coronary special that Cameco went through. And all the extra it charges is a 0.7% annual expense fee.

Do the fundamentals in uranium support the price action in URA? No. Not yet. But as often is the case, stocks can lead the news.

Next week, I’ll show you an interview I filmed at the world’s top mining conference with the CEO of a uranium company. He talks about the industry generally. He strongly believes prices are about to ramp up.

That’s what we may be seeing priced into URA right now.

Sure, I’m disappointed with how uranium has acted these last three years. But you can’t let emotion get in the way of trades. And now, it sure looks like that Atomic Monster is rearing its ugly head.

Pass the popcorn. This could be fun.

All the best,
Sean

***

Thanks Sean, and great analysis, as always.

I know I am glad to have Sean working with us again, and I’m not the only one.

In fact, several readers weighed in on Sean’s return, and given today’s theme, I only thought it right for me to let those comments shine.

Jeff W. writes:

Sean, I always enjoyed your reports in the past when you were with Weiss. You always support your forecasts with good information from the field at mining locations to discover the facts, which is important. Good to see you back.

Judy S. writes:

I am so very happy to see you back at Weiss. I always enjoyed reading your articles and know that you are a great analyst. Thinking I am going to really like this year; welcome aboard once again. Can’t wait for your good trades.

Dave S. writes:

Sean, welcome back to Weiss. I’m sure we’re all still a little stunned by Larry Edelson’s death, so it’s good to see your name here again to lend a hand with (precious metals)-related issues. Best of luck in your new position at Weiss, and may we all make some money this year in gold and silver.

Brad response: There’s love all around for Sean, so once again, welcome back, my friend.

And in case anyone missed it or wants to re-read it, Sean debuted his daily Afternoon Edition column, "Mining for Money," yesterday. You can read his thoughts on "Why Junior Miners are on the Launch Pad" here.

 

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I want to know what you think, so if you have a comment or question about today’s Afternoon Edition topic, or any of the topics we cover, let me know. All you have to do is leave me a comment on our website or send me an e-mail.

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It was a happy Paddy’s Day for the Nasdaq, which celebrated by hitting an all-time high at 5,901. The move was fractional, and the same was true of the small losses on the Dow and S&P 500. Each index closed higher for the week, though, thanks to Wednesday’s post-Fed-announcement gains.

• CS, UBS say it’s not too late to buy equities: Credit Suisse and UBS Corp. are reassuring wealthy clients to buy stocks, and that any perceived political risks are "benign." (Bloomberg)

• Solid gold week: The yellow metal advanced 2.4%, bolstered by weakness in the greenback. Gold saw its biggest one-day advance in eight months on Thursday (+2.2%) after Fed Chair Janet Yellen assured the markets that monetary policy will stay accommodative "for some time." This is gold’s first weekly gain this month.

• Oil also saw its first weekly gain this month: After last week’s 9% drubbing, oil rose 0.6% on light trading volume.

• Cemex (CX) won’t build border wall: This week, the president asked Congress for an initial $4.1 billion to start building the U.S.-Mexico border wall. But the Mexican cement giant, which also has operations in the U.S., said it has no plans to participate in this project.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily