Uranium in a Good Spot?The uranium spot price and mining equities have experienced a significant run since the pandemic lows-- largely due to SPUT purchasing from the spot market, panic buying by utilities at the beginning of Russia's invasion of Ukraine, and the prospect of Japanese restarts. But the days of going up multiple times over seem to be over: the spot price has been drifting sideways to downwards both due to SPUT reducing their buying and the typical utilities purchasing cycle having been completed earlier in the year. In the social media uranium space on Reddit, Twitter, and Youtube there is a mood of pessimism and disappointment. An endless parade of bullish catalysts--such as mergers and acquisitions, increased mineral estimates, incredible earnings, US Strategic Uranium Reserve purchasing and HALEU funding-- all seem to have limited impacts on the sector, raising up a penny stock here and there.
As we enter 2023, I have two arguements for a reversal in the downtrend; one fundamental and another technical.
I'm assuming the fundamental catalysts for another run in the uranium sector will be similar to the previous run. Sprott will increase their purchasing of precious metals in a declining interest rate environment, and that will extend to their purchasing of uranium as well. Utilities will enter another contracting cycle-- whether that is in early spring like 2022, or in late fall like it usually is, remains to be seen. And SWU prices (the cost of enrichment) remain elevated, no doubt having a downstream impact on the spot price. The uranium spot price is the main driver of bull runs in the uranium equities-- e.g. just take a look at the similarities between charts of $LEU and UX1!. Headlines about DOE funding and X-Energy's SPAC may drive inflows into the sector next year, but remember that sentiment in the stock market does not drive up purchases on the spot market
On a technical note, take a look at the three points where I've circled on the daily chart of $URNM above. There is bullish divergence on the RSI (where it is making a higher high while the candles make a lower high). The MACD is crossing over to the upside, which often precedes a significant amount of momentum to the upside. The candlesticks from the past week have made a double bottom at $29.75, also touching for the third time the supporting trendline that has marked a temporary bottom in the structure where we have been for the past two years. Now this larger pattern has neither confirmed as a descending wedge (bullish) or a head and shoulders with a diagonal neckline (bearish). But I will wager that this is a bottom for $URNM and many uranium mining stocks for the near and possibly long term, barring new lows on the broader market.
