Spot Uranium And Miners – Commodity Piece
Supply Squeeze Is Coming
In our recent Uranium article posted last Thursday (found here), we wrote about the supply squeeze that is building in this asset class. Just a day after, on Friday, we witnessed evidence of such a development, which sparked a 5% move up in spot Uranium. What exactly happened and what opportunity does it present? That’s exactly what we’ll cover in this article.
Spot Uranium Technicals
Spot Uranium had been on quite a downtrend since mid-May 2022, falling around 28% from the mentioned date. However, since mid-June, it had been building a bullish RSI and MACD divergence on the daily timeframe (price making lower lows, but RSI and MACD making higher lows).
This underlying strength needed a catalyst, which the market finally got last Friday (we discuss this catalyst in the next section). As a result, price jumped higher and reclaimed the 9 and 21-daily EMAs.
The next and major resistance level to reclaim is $26.12, which would also mean reclaiming the 55-daily EMA. This would open the runway for price to run-up to $33.79 (early 2024 highs). Whereas, the main support level to maintain going forward is $24.01 (or $23.42 in the worst-case scenario). IF this breaks (not our base case), then price could fall as deep as the support zone that stands between $18 to $19.75.
The 4-hour timeframe shows a clearer picture of the multiple drives of bullish RSI divergence that was building, signaling significant underlying strength. But what exactly was this catalyst that came out last Friday?
Spot Uranium Supply Squeeze
It was none other than Kazatomprom’s 2025 production guidance announcement. Kazatomprom is the world’s largest Uranium producer. Last Friday, it announced a 17% cut in its 2025 production target because of “delays in construction and shortages of sulfuric acid”. This caused supply squeeze worries to spark, which translated into an up move on spot Uranium.
This is likely just the beginning of the supply squeeze that we’re anticipating Uranium to witness this decade. Of course, the situation will get better over time, but not until it first gets worse i.e., a major supply squeeze that would drive Uranium prices significantly higher, which would then incentivize companies with poor economics to justify coming online and causing an increase in supply overtime. However, such a process takes years to play out typically, providing ample runway for prices to skyrocket.
Uranium Miners present a higher risk-reward opportunity for this asset class. That’s exactly what we’ll cover in the Premium Section next. We’ll first look at spot Uranium’s Cycle Forecasts to get a directional bias. Then, we’ll analyze the 2 main Uranium Miner ETF’s (Uranium Miners - $URNM and Junior Uranium Miners - $URNJ), along with their Cycle Forecasts. Lastly, we’ll evaluate the opportunity in 4 key individual Uranium stocks, some of which are a must-have for this decade’s Uranium bull run.
Spot Uranium Cycle Forecasts