Cameco Corp. has several interesting investment characteristics:
It recently entered into a period of seasonal strength from January 21st to June 5th. The trade has been profitable in 10 of the past 10 periods. Average gain per period was 21.7%. It’s not too late to enter the seasonal trade this year. The stock currently is trading slightly below its January 21st 2010 price.
Cameco’s technical profile is improving. Intermediate trend is up. The stock recently moved above its 200 day moving average and is testing its 50 day moving average. Short term momentum indicators are recovering from oversold levels. A MACD buy signal was recorded last Thursday. Stochastics already are short term overbought. Support is indicated at $25.31 U.S. ($27.11 Cdn). Resistance is at $33.74 U.S. ($35.00 Cdn.)
Encouraging news is likely to be announced when the company releases fourth quarter results on Wednesday February 24th. Fourth quarter earnings are expected to improve to $0.53 Cdn. from $0.46 Cdn. Of greater importance, the company is expected to update estimates on costs and production for 2010. Cameco announced on February 11th that the flooded Cigar Lake uranium mine has been pumped out and should be fully secured by October. The Cigar Lake uranium mine potentially is the largest uranium in the world when fully operational.
Sector news on the uranium industry also has turned positive recently. Last week, President Obama committed $8.3 billion in loan guarantees for the production of two nuclear power units at an existing nuclear power facility. Political uncertainties in uranium producing areas raising the possibility of a restriction in supply (most notably Niger with 7% of the world’s production where a political coup occurred late last week).
Merv Burak, a technical analyst who follows the uranium sector closely recently upgraded his short term opinion on the sector to Bullish. Merv currently has a positive short term stance on Cameco.
Don Vialoux, chartered market technician, is the author of a free
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