Uranium Setups – Commodity Piece
Key Uranium Names Not To Be Missed
This is a follow up piece to the previous Uranium article that can be found here. We would like to begin this article by first clearing out some misconceptions that are being spread around about Uranium and then directly get into the key setups for high quality Uranium names.
There’s an argument out there that states that a potential de-escalation in the Russia/Ukraine war could reduce Russia supply chain risks for Uranium. However, given the geopolitical backdrop + sanctions, it wouldn’t be wise for Utilities to rely solely on Russia as a Uranium supplier anymore. Additional sanctions on Russia could be a major threat for Utilities relying solely on Russia (eg: US Congress recently passed a bill to ban Russian imports of Uranium). Therefore, even in the event of a de-escalation, we do not see Utilities only relying on Russia for their Uranium hereon.
Moreover, some expect that a potential recession in 2024/2025 could hamper the demand for Uranium. However, when a nuclear reactor is built, it typically has a life span of over 30 years with very high building costs and running costs involved. U3O8 Uranium is hardly about a 5% cost, so even if U3O8 prices triples from here in a bad market environment, Utilities won’t be hesitant to buy Uranium, given the high costs involved in keeping a Uranium plant stagnant. In the event of a recession, demand for a 0-carbon baseload energy won’t be as affected as gas and oil demand will be.
Lastly, people on Twitter are also warning of a potential nuclear accident that might hamper Uranium demand overnight. However, this is an extremely low probability risk, given that the Fukushima accident happened in 2011 and the one prior to that was the Chernobyl disaster in 1986. In other words, a nuclear accident is not a common occurrence by any means. Moreover, with major players like Cameco and Kazatomprom experiencing production issues, we do not see this Uranium bull run end anytime soon. Back in 2007, when Uranium prices topped, it was during a supply surplus, not deficit. Today, we’re in a supply deficit and this is expected to worsen before getting better. Therefore, the risk-reward still favors to the upside in the current market environment.
However, even with upside being the bias, sharp Uranium pullbacks are still part of the game. That’s exactly what we believe is in the cards for now before the next leg up. Therefore, let’s look at the key attractive setups that would be optimal money-making bets if and when the next leg up occurs.
Spot Uranium
To analyze spot Uranium, we’re using the ticker $U.UN but for those interested in buying spot via US exchanges can use $SRUUF instead. Spot Uranium recently got rejected at the $33.79 resistance level after a strong run up. This pullback could still see some more downside before finding a footing. The downside areas of interest are the $24 support level and the support zone between $18 to $19.75 (if a deeper pullback occurs). Remember, a 40% to 50% pullback in Uranium is not out of the ordinary, but presents a solid buying opportunity given the fundamental backdrop.
Uranium ETFs ($URNM, $URNJ, $URA)
Uranium Miners ETF ($URNM) recently broke its uptrend line and the $50.88 support. Further downside in the short-term aligns with a pullback in spot Uranium as well. The downside areas of interest are $42.07 support level and $35.62 support level (in the event of a deeper retracement). This should provide an attractive buying opportunity for long-term holders.
Uranium Junior Miners ETF ($URNJ) recently broke below its $25.48 support level. Further downside in the short-term in confluent with spot Uranium and $URNM. The downside area of interest is the support zone between $22.50 and $23.25. Even the uptrend line coincides with this support zone, providing further confluence to the support zone. This support zone should provide an excellent buying opportunity, especially for long-term holders. Remember, $URNJ is composed of Juniors, which are typically more risk-on as compared to $URNM (Uranium Miners).
Global X Uranium ETF ($URA) recently broke its uptrend line and the $31.45 support after a slight deviation above it. Further downside in the short-term aligns with a pullback in the rest of the Uranium names. The downside areas of interest are $23.89 support level and $18.33 support level (in the event of a deeper retracement).
In the next section for our paid members, we’ll be going over the spot Uranium Cycles Forecast, and also taking a look at the technical setups for 4 MUST HAVE individual Uranium stocks with massive upside potential.