ChartWatch: Nuclear meltdown! ASX uranium stocks, Boss, Paladin, Deep Yellow, Bannerman, Silex & Lotus

On Thursday, the world’s largest publicly listed producer of uranium, Cameco Corporation (NYSE: CCJ), delivered its fourth-quarter earnings report. Cameco enjoyed a major reversal in fortunes on the back of surging uranium prices, delivering earnings per share (EPS) of US$0.21 for the quarter compared to US$0.09 for previous corresponding quarter. The consensus among analysts heading into the announcement was US$0.22.

Uranium production of 17.6 million pounds was lower than previous guidance, and forecast production would be negatively impacted by ongoing issues with the supply of sulphuric acid at its 40% owned Inkai uranium mine in Kazakhstan (60% Kazatomprom).

Looking forward, Cameco expects it will produce 36 million pounds of uranium at its Canadian operations in 2024. It would begin work to extend the mine life at Cigar Lake to 2036, and progress planning on expanding production at McArthur River/Key Lake to nameplate capacity of 25 million pounds per annum.

The slight miss in earnings and disappointing production performance was likely the reason for the 5% sell off in Cameco’s shares post-announcement, but news of significant expansion plans, as well as a substantial increase in reserves (from resources) at Cigar Lake, was the likely catalyst for a 3.3% fall in the uranium price.

ASX uranium stocks in meltdown mode…

The sharp fall in uranium prices has had a knock-on effect with ASX uranium stocks today. The sector is seeing losses north of 5% in most cases, with sector heavyweights Boss Energy (ASX: BOE) (-12.1%), Paladin Energy (ASX: PDN) (-7.5%), Deep Yellow (ASX: DYL) (-10.6%), and Bannerman Energy (ASX: BMN) (-10.6%) bearing the brunt of the selling.

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ASX uranium are suffering a violent correction today

On the face of it, the sudden and severe sell off in local U-stocks appears overdone compared to Cameco’s decline, and especially compared to the relatively minor fall in uranium prices. But some would argue the sector was priced for perfection before the latest developments, and potentially, there was far too much hot money chasing momentum.

These are not concerns of the technical analyst, however! All that matters to the technically minded is trend, price action, and candles. So let us dial down the noise and take a cold, hard look at the technicals of the major ASX uranium companies to try to determine if it’s the beginning of the end of the recent uptrend in U-stocks, or if it’s just the end of the beginning!

Uranium Futures

The developing double top must be watched closely

ST/LT Trends: ⬆️ / ⬆️

Price action: 📉

Candles: n/a

Key Support / Resistance: 29 Jan trough low @ 99.65 / 18 Jan peak high @ 106.45

Commentary: A second peak just below the recent 106.45 peak high demonstrates it is a key area of excess supply which must be overcome for the uranium price to resume its prevailing short and long term trends. Those trends remain intact, but the close below the trough at 99.65 swings price action back to lower peaks and lower troughs and puts significant pressure on the short term uptrend. That uptrend remains intact as long as the price continues to close above the short term trend ribbon (light green zone). Below it, I see some minor potential support at 92, but then not until the long term trend ribbon which kicks in around the low-80’s.

Boss Energy (ASX: BOE)

A large and full black is often meteor versus dinosaurs sort of stuff…

ST/LT Trends: ⬆️ / ⬆️

Price action: ⬅️➡️

Candles: ⬛ (the last one is the only one which matters!)

Key Support / Resistance: 29 Jan trough low @ 5.16 / 2 Feb peak high @ 6.12

Commentary: Big and full black candles are never a good look. The gap down is even worse. I discussed the significance of gaps in the ChartWatch section of yesterday’s Evening Wrap. I often describe moves such as these as “species ending events” channelling meteor versus dinosaurs sort of stuff. The short term trend ribbon and the 5.16 key support point are the levels to watch now. A close below either would indicate the supply-side has wrestled control of Boss Energy’s stock price. Only a quick reversion to white candles and or downward pointing shadows could show demand-side control still lingers.

Paladin Energy (ASX: PDN)

A disappointing result given the strong techincals prior to today

ST/LT Trends: ⬆️ / ⬆️

Price action: ⬅️➡️

Candles: ⬜⬛

Key Support / Resistance: 1 Feb trough low @ 1.26 / 8 Feb peak high @ 1.46

Commentary: A similar gap and run pattern here, and equality indicative of newly acquired supply-side control. There’s a minor support point at 1.26 which I’d like to see hold, as well as continued closes above the short term trend ribbon. A frustrating development here because the technicals up until today’s move were very strong. A period of sideways consolidation here wouldn’t be a bad thing as the short term supply washes through. It would show longer term demand remains resolute. Demand-side candles would be an even better signal.

Deep Yellow (ASX: DYL)

Today’s deep sell off is unwanted for Deep Yellow shareholders

ST/LT Trends: ⬆️ / ⬆️

Price action: 📉

Candles: ⬜⬛

Key Support / Resistance: 1 Feb trough low @ 1.44 / 2 Feb peak high @ 1.765

Commentary: Another chart which I would have said was extremely strong prior to today’s candle. Today’s candle is not as much of a definitive showing of supply-side control as those for BOE or PDN, with a downward pointing shadow indicating some buy-the-dip activity creeping in. It’s also trying to hold the short term uptrend ribbon and the trough low at 1.44. Preferably, it continues to close above both, and we see the resumption of demand-side candles soon. The opposite would demonstrate the supply-side has control of the price and lower support levels could be tested.

Bannerman Energy (ASX: BMN)

Rarely will you see such a sudden about face in a chart

ST/LT Trends: ⬆️ / ⬆️

Price action: ⬅️➡️

Candles: ⬜⬛

Key Support / Resistance: 29 Jan trough low @ 3.27 / 8 Feb peak high @ 3.99

Commentary: Nearly equal and opposite candles from Thursday to Friday. It is another disappointing move given how good the technicals looked yesterday. But such is the nature of technical analysis, you can only trade what you see because the future is unknown. Anything can happen, and this is why good traders have a plan for what to do when something doesn’t go their way just like what has happened here. I’d like to see the price continue to close above the short term trend ribbon, and definitely above 3.27. Otherwise, the supply-side has control and lower points of demand could be tested.

Silex Systems (ASX: SLX)

Another sharp turnaround, another big problem for the demand-side

ST/LT Trends: ⬆️ / ⬆️

Price action: 📈

Candles: ⬜⬛

Key Support / Resistance: 1 Feb trough low @ 4.93 / 7 Feb peak high @ 5.78

Commentary: I won’t be the broken record here, but clearly the gap down and supply-side candles create issues for the short term uptrend. Closes should remain above the short term uptrend ribbon, and preferably above 4.93. Otherwise, you guessed it, supply-side control, testing lower points of demand, all that sort of stuff! As is the case with all of these charts, only demand-side candles and a return to higher peak and higher troughs would indicate the demand-side remains in control and the prevailing short term trend remains intact.

Lotus Resources (ASX: LOT)

Today’s downward pointing shadow indicates potential buy-the-dip activity

ST/LT Trends: ⬆️ / ⬆️

Price action: ⬅️➡️

Candles: ⬜⬛

Key Support / Resistance: 1 Feb trough low @ 0.34 / 2 Feb peak high @ 0.38

Commentary: Another whose candle is showing some buy-the-dip (downward pointing shadow). Some demand from the previous trough at 0.34 might also be working in the system. As long as the price continues to close above here and the short term trend ribbon, the demand-side remains in control. Not the worst of this bunch.

Carl’s Technical Analysis Methodology Key

Trends (ST Trend ribbon: 21 & 34 EMAs || LT Trend ribbon: 144 & 233 EMAs)

⬆️ = Uptrend, the ribbon is rising indicating a higher probability the market is in a general state of excess demand

⬇️= Downtrend, the ribbon is declining indicating a higher probability the market is in a general state of excess supply

➡️ = No trend, the ribbon is flattening indicating a higher probability the market is in equilibrium

Price Action

📈 = Rising peaks and rising troughs indicating buy-the-dip activity and supply removal (i.e., indicating a higher probability market is in a general state of excess demand)

📉 = Falling peaks and falling troughs indicating sell the rally activity and demand removal (i.e., indicating a higher probability market is in a general state of excess supply)

⬅️➡️ = Neither of the above scenarios, market price action is indecisive

Candles

⬜ = Predominantly demand-side candles in the recent past, i.e., white bodies and or downward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess demand)

⬛ = Predominantly supply-side candles in the recent past, i.e., black bodies and or upward-pointing shadows (i.e., indicating a higher probability market is in a general state of excess supply)

⬜⬛ = Mixed, i.e., indicating no discernible trend towards demand-side or supply-side candles in the recent past