Saturday, March 17, 2007

Uranium Index, Week 9

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24100 remains the key resistance level for this index. The action this week gave no clues as to which direction the index will be headed. The bounce that occurred in the earlier part of this week was encouraging, but it also made a lower high, which is not a good sign. It's safer to assume that the index will be trading in a range somewhere between 21000 and 24100 until it proves otherwise.
This week the index has demonstrated that it can and will ignore the influence of the the U3O8 Spot price going up. Whether it will be able to continue to ignore the spot prices in the future remains to be seen. Of course, normal logic dictates that the index should eventually respond to increasing spot prices. However, the market has, and is currently demonstrating the real possibility of uranium stocks decoupling from the effects of the spot price. As irrational as that may sound, it is a very real scenario. Only time will tell. Certainly there is no rush to buy in right now.

One other interesting development was the occurrence of flooding at one of the major uranium mines owned by Energy Resources in Australia. The effect of that flooding was to delay production, which caused the Spot prices to jump up yet again.

One last development is the closing of the merger between UUU and SXR. I received the voting proxy in the mail, and it seems that April 13, 2007 will be the date that the merger between the two companies will be completed. I have until that time to find a replacement for UUU in the index. I have pondered the possibility of splitting the contribution of UUU into two junior uranium companies, just to provide more diversity. Not sure about the good or the bad of this potential move, will have to think about it some more.

Index Value: 23,282.45
Best Performers: UUU, U
Worst Performers: CXX, FSY.


Week 9 :          -1.93%
Since inception: +16.40%

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