Uranium

By: Sol Palha | Sat, Sep 8, 2007
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"We know what happens to people who stay in the middle of the road. They get run over." ~ Aneurin Bevan 1897-1960, British Labour Politician

Several factors resulted in producing a rather large pull back in Uranium bullion prices. The main reason as usual was not a normal factor; in other words it was due to government intervention and manipulation. The US dept basically dumped 520,000 pound of uranium on the market and as expected it created a mini panic. Hedge funds which had loaded themselves with Uranium suddenly decided it was time to bail out and started to sell into weakness instead of strength. However what made the situation worse was that a large number of hedge funds were over exposed to the sub prime mortgage sector and thus were facing a bunch of margin calls. When you face a margin call you have to start selling your best assets to meet these calls. It's for this reason we have never advocated margin trading in this service. Margin trading is only for individuals who understand the concept of all or nothing and truly understand the concept of defined risk. In addition professional that trade on margin should only dedicate a small portion of their funds to this type of activity and to make sure this is the case a separate account should be opened for margin trading.

Uranium bullion and Uranium stocks were subjected to 4 powerful short term forces

  1. Prices were driven lower by the sale of government uranium. A very dumb, stupid and ignorant move as there is a huge shortfall of uranium at present. These very chaps will come crawling and buy back Uranium at significantly higher prices in the future. They tried to stall the price of Gold and failed the same held true with silver and now they will fail with uranium also.
  2. Hedge funds who owned bullion assumed a top was in and started to take profits but one should always sell into strength and not into weakness. Once again we feel that these chaps will bang their heads on the wall in frustration in the months and years to come.
  3. Small traders panicked and dumped all their uranium shares this resulted in prices spiking below all support levels as when fear rules it dominates everything
  4. Finally many hedge funds were forced into liquidating their strongest performing assets among which were Uranium bullion and Uranium stocks to meet margin calls due to their over exposure in the sub prime mortgage markets.

One can clearly see the rapid pressure bullion was under in the last few weeks when one looks at the one year chart. Note that right now prices are sitting on the long term trend line but we would not be surprised to see them dip below these levels momentarily.

Everyone is now busy screaming about how the bull has come to an end; a perfect example of mass hysteria and mass madness in action. Look how they fail to look at the chart closely. In one year prices shot from under 50 dollars to almost 140 dollars; that's close to a whopping 200% gain.


Charts were supplied courtesy of www.mineralstox.com

If one looks at a 3 year chart prices have risen almost a 1000%; we are not sure what math classes the masses have taken but our analysis indicates that a pull back of up to 36% is nothing out of the ordinary. Now we do not envision bullion prices pulling back this much but if they were to one should not panic instead they should kneel down and thank whatever higher power they pray to and start aggressively buying uranium.

The masses which include many hedge fund and Mutual funds, large speculators, small speculators, program traders and your average Joe always over react the moment the going gets a bit tough. Many subscribers had written in asking us why we kept posting entry prices to many of the uranium stocks when they were currently trading so much higher then our suggested entry points and some even stated that we were wasting our time; well know you know why. Patience is a virtue and its rewards are usually great in nature. Those of you that were sorry that you missed the last massive run, it might be time to look into taking a few positions now. Certain Uranium stocks are exhibiting early strength; trend analysis and or multiple time frame analysis can you help you pick the best ones.

It's always tough to buy when the scenario looks bleak and easy to buy when things look good but note that traders usually make large sums of money by buying when everything looks bad and taking profits when everything is looking rosy. The prices of many Uranium stocks have dropped to incredibly low levels and we are pretty sure that in the not to distant future most uranium stocks will fully recover and be trading significantly higher then they are today.

Remember that the overall supply of Uranium is not increasing. We cannot meet current demands so what's going to happen in the future when all these plants start to come online. China is adding one new nuclear plant almost on a monthly basis, Russia has just announced plans to build another 42 plants and they have also announced that they are going to build portable floating nuclear power plants that they plan to sell to almost anyone that can pay for them. Hum the future is strange here because every nation is busy building nuclear plants but none of them are allocating the same amount of money to finding new sources of Uranium. One day there is going to be a massive bidding war for uranium and it's really hard to tell how high prices could eventually go but we are sure that they will be sky high.

Once again the smartest thing to do now is to look for uranium plays that are showing early strength and start taking positions in those for they will be the leaders of the next upward leg.

Foot note

There is a lot of uranium in this planet particularly close to the core of the Earth but none of the world's governments have mounted massive exploration or developmental programs. They are busy spending billions of dollars on building new nuclear plants but have hardly given a thought to how they are going to power these plants in the future. If the same amount of money was thrown into finding new sources and developing current sources of Uranium we might not have this shortage. The shortage is simply due to lack of planning and lack of foresight. As usual they always wait till the situation hits the almost unbearable zone before acting. The problems is that this time there will be no quick fix to this self created disaster; it takes anywhere from 2-4 years before a new mine can come online so in between that time frame prices could go ballistic as demand continues to increase with the addition of every nuclear plant and the supply continues to dwindle.

Random Musings

Advice

Merriam Webster online dictionary defines the word vice as the following

Moral depravity or corruption : wickedness b: a moral fault or failing c: a habitual and usually trivial defect or shortcoming : foible <suffered from the vice of curiosity

The word ad on the other hand is short for advertising. Thus one can conclude that the word advice really means the advertising one's short comings or failure or defect. Hence one should be rather careful where one gets their advice from as most so called experts are nothing but fools in disguise. Our old time subscribers already know how we feel about experts as the word itself quite clearly speaks for itself. If one has to spell it the way it sounds then it would look something like this EX SPURT which basically means a spurt that was over even before it began or put in simple English most experts are usually nothing but glorified idiots.

So taking it one step further it's rather amusing to see so many experts giving so much advice in regards to the housing sector, the massive crash the sub prime mortgage market has experienced etc. I mean come on the writing was on the wall long ago they could have and should have been talking about this almost 2 years ago instead of harping on it now.

If one wants to really get a laugh one can draw the following conclusions on experts. A bunch of has been's trying to advertise their shortfalls or moral depravity or corruption or habitual shortfalls or defects or maybe a combination of all the above.

In the end there are no experts, no masters, and no such thing as real teachers in life. For to be a master or a true teacher one has to understand every single thing there is to understand in that given field. Unfortunately we feel that at the very minimum it would take several generations to master this knowledge and most humans are dead and buried in less then one generation. Thus we only have advanced students at most as we are all learning some of us just happen to be further along the path of knowledge then others but in the end we are all students. Never listen to anyone who pushes that he/she is an expert or claims to be an expert or a master. It is for this reason we at TI have always refused to be called experts, masters or teachers; at most we will settle for the title of advanced students.

Leader

Most assume that a good leader is one that leads them to victory regardless of whether the battle ground is the sports field or the stock market. What really makes a good leader is not his or her ability to win but their ability to deal with a loss and to deal with it effectively. For as we are found of saying one should embrace their victories and losses with equal intensity for both reveal very interesting data. Your wins tell you what you were doing right but your losses tell you what you were doing wrong. If you only embrace your winning strategy and not the losing strategy then you will never understand why you were losing and one day one of those loses could be big enough to completely wipe you out. Everything that happens in life whether it's good or bad has value; the problem is trying to find the value and the only way to do this is to embrace it and then tear it apart. You can only tear something apart once you embrace it and accept it. As we have stated before life is not good or bad, life just is; it goes on with or without you. What makes something good or bad is our perception.

We spent a bit of time on the above two topics because we are going to tie this with a very important concept in regards to investing in the markets and that is setting ones profit targets.

We have spoken at length on this on numerous occasions but we will continue to address this again and again in the hope that each time we do so a few subscribers take the time to listen and implement these very simple and helpful suggestions.

There are very few services that actually attempt to train their subscribers to understand the markets and most importantly illustrate to them that their money is best managed by themselves. In other words the subscriber should be the one deciding when to pull the trigger and not sit there like a baby with his or her mouth wide open waiting for the next spoon of food. Why are we making this strong assertion? There are no two traders in the world that are alike. Hence if the subscribers to a newsletter service let the individuals behind the service dictate all the rules several things will happen

  1. They will never learn anything when it comes to the markets
  2. They will never understand that the markets are nothing but a simple extension of ones daily life. If one truly understands the simple concept of life one can start to understand how the markets operate. One of the simplest concepts of life is that the masses are always wrong and that they will always jump in too late and jump out after they have lost their shirts and pants.
  3. They will never understand to take responsibility for their errors and learn from these mistakes as they will always have someone to easily blame for them. This will prevent them from reaching their full potential for the only way to better oneself is not only to accept ones success but also to accept ones failures. After accepting ones failures one is then able to look for the cause and after identifying the cause one can attempt to come up with a solution.
  4. This is the most important one. It's your money and no on in this world can respect and treasure this more then you can. Hence does it not make sense that one should at the very least take some responsibility in this area

We have continuously advised subscribes to at the very least identify one profit zone that they truly feel comfortable with and then sell half of their holdings when this zone is hit. They can then hold onto the other half and wait for our exit instructions. We have zones ranging from the 20-30% all the way to the 100% ranges. Most that have followed our advice have chosen to take partial profits (selling half their shares) in the 65-100% ranges and then they hold onto the other half and wait for our exit instructions. There are many ways to customize this however the main concept that we wish to drill home is that every single subscriber should at the very least identify their profit targets for half their holdings.

Bottom line we are trying to do something new and as with anything new there will be stiff resistance but we feel that the only way to learn something is to try; in order to walk one first has to crawl more importantly one must be willing to crawl or they will never learn to walk. With the markets the only way to win is to understand your own needs and wants and then only can you address them. No outsider can do this for no outsider can go into your mind and find out what your specific safety and risk zones are. Only you can do this.

"There is no more miserable human being than one in whom nothing is habitual but indecision, and for whom the lighting of every cigar, the drinking of every cup, the time of rising and going to bed every day, and the beginning of every bit of work, are subjects of express volitional deliberation." ~ William James 1842-1910, American Psychologist, Professor, Author

 


 

Sol Palha

Author: Sol Palha

Sol Palha
TacticalInvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

The information contained herein is deemed reliable but no guarantee is made about its completeness or accuracy. The reader accepts this information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Any statements non-factual in nature constitute only current opinions, which are subject to change. The author/publisher may or may not have a position in the securities and/or options relating thereto, & may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise. Neither the information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. The author/publisher of this letter is not a qualified financial advisor & is not acting as such in this publication. Investors are urged to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.

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