After listening to the Cameco Corp. conference call yesterday, I was kicking myself squarely where I sit down because, as a bull on uranium for at least five years, I never entertained the idea of owning the world's fourth largest uranium producer.
While it has had its share of problems over the past few years, it appears that Cameco Corp. (CCO:TSX; CCJ:NYSE) has finally cleared the decks.
"Gross profits have also improved as our uranium average unit cost of sales decreased from last year as we continue the transition back to our tier-one production cost structure . . . We are seeing durable, full-cycle demand growth across the nuclear energy industry."
The stock added US$3.05 (5.6%) yesterday but is challenging the 52-week high at US$42.165, above which it has blue-sky potential, not unlike the last time it broke out to a new high in July, when it added 27.93% in three months.
Also significant is the 2007 all-time high, last seen when uranium prices hit US$138/lb. at US$45.49. The two price hurdles are all that are standing in the way of an explosive move to mirror the July-October ramp, which would suggest a target range of US$53.96 to US$56/86.
The price triggered a bullish MACD crossover ten days ago, and the money flow indicator is bullish. RSI at 64.53 is approaching "overbought," but as you can see from the move back in September, RSI went into the 80's and stayed elevated for several sessions before it corrected.
Accordingly, I think that there is still room for a Q4 dash led by a top performer in a largely ignored sector as portfolio managers scramble to generate alpha as they head toward year-end bonus time.
In the GGMA Trading Account:
- Buy 50% position in CCJ:US at $42 limit. (Add on any weakness)
- Buy 50% position in CCJ March $40 calls at $5.50. (Add on any weakness).
More of this later.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Cameco Corp.
- Michael Ballanger: I, or members of my immediate household or family, own securities of: Cameco Corp. My company has a financial relationship with: Cameco Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
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