I like to focus on weekly charts to find nice setups. I am not a short-term trader. So the setups can take time to roll into confirmations, but I like the longer term views.
One year ago, Cameco said it was going to limit supply to improve the pricing for Uranium. A quick note on a chart helps remind us. This is the Uranium Miners ETF.
The recent low made 23 month lows by dropping just below the previous low. Interestingly, that did not kick in a lot of stops to cause the volume to surge. Now on the rebound, a couple of days have had above average volume. The momentum (MACD) and the price have compressed to where we are getting close to the apex of the trend lines on each panel.
The chart below shows Cameco over the last 15 years. Notice the 12-year downtrend. On the right-hand side, we can see the annotation of limiting supply. Since then, the momentum has been improving and on the most recent high, the stock, briefly moved above the trend line. There are a couple of other clues on the chart. Notice the change in RSI behavior. The RSI is making higher lows after consistently falling to the 30 level for years as shown in the red shading. The 40-week moving average in blue has turned up and is rising. Now the $12.50 – $13.00 level is resistance. The horizontal brown line is where price closed Friday November 2.
That’s the long game. Zooming in on the last three years, the situation sets up. Price closed at the brown line so we can see how close it is to the red down-sloping trend line. Another week like the last week and CCJ will be challenging the three-year highs.
One of the big signals for me on the chart is the PPO momentum bouncing off the zero line for the first time in ten-years. Now there is a dotted line trend line on the PPO. A break above the dotted line would be extremely bullish and would confirm the major trend change. This would convert these continuous drops in momentum from above zero to finally surging higher. Even with the overall market weakness, this stock bounced off the 40-week moving average. The last volume bar shows above average volume. Notice how the Chaikin Money Flow has been positive recently. The price is at a critical inflection point as we want the CMF to continue to stay positive.
While there are lots of companies in the Uranium space, Cameco USA (CCJ) has a nice setup. You can also find a Canadian listing at CCO.TO.
Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com