Uranium: A Technical Reaction
10/21/2005 12:00 am EST
"The construction of more nuclear power plants is inevitable," notes technical analyst Yola Edwards. "That means increased business for the world’s largest uranium producer." Here’s her review of Cameco, the Canadian uranium mining company.
"Oil appears as though it is in the third wave of a five-wave advance, that is likely to extend its rally to about $86 a barrel over the next six months. Soaring oil prices from weather-related issues, which are temporarily shrinking supply, and the China factor, which may keep demand for crude spiraling higher, may inspire a sustained effort to secure long-term alternative energy sources.
"Speculative investors might think about adding Saskatoon-based uranium producer Cameco Corp. (CCJ NYSE), the world’s largest uranium producer, as an alternative commodity play. Although the mention of nuclear energy plants instills a sense of fear as the horrors of the Chernobyl disaster are recalled, we should remember that nuclear plants, all of which are powered by uranium, provide one of the cleanest sources of energy available today.
"Currently there are 425 nuclear reactors operating around the world with 33 new ones planned, mostly in Europe and Asia. In addition, China has announced plans to quadruple its current nuclear power output by 2015. Canada is one of the world’s largest supplier of uranium, producing 32% of global output. As crude oil prices increase, so too will the prices of alternative energy sources.
"Cameco, which trades on both the New York exchange as well as on the Toronto exchange, is currently at an all-time high. Although technically we consider the stock to be overbought, we rate it is a buy on any short-term pullback. The stock has traced out a long-term bullish flag pattern, which suggests a possible rally of about 30% in price over the next two years."