Technical Analysis -- Why does URRE not perform as others?
Manny here are wondering why URRE is down when other uranium stocks are up, or when the spot price is up, etc.
Markets down just move in one direction and not all uranium stocks move in sync, except for the rarer occasions when the whole sector is moving very strongly. But stocks don't move randomly either, they move in specific cycles. Different uranium stocks may well be in different internal cycles and not move together. During the Fall of 2010 all of them pretty much went straight up from much lower prices. But since December a sector-wide consolidation has set in causing each stock to fall into their own specific "rythm" of dealing with consolidation, digesting the increase in prices and pulling back in various degrees, when investors and traders take some profits and contemplate the market, even may turn bearish for a while.
Traditional technical analysis has various tools to measure stock performance, to determine trend, momentum, conditions of overbought or oversold prices.
I performed a detailed technical analysis on this stock from the perspective of the Elliot Wave Principle, an advanced but not 'traditional' tool, which is unfamiliar to most traders. The Principle expresses that stock price move in what are called 'waves', peaks and valleys of price action.
Impulsive motion of the market is divided into 5 waves, 1 up, 2 down a little, 3 up (usually a lot), 4 is down consolidation, and 5 is another progress. Consolidations occur in 3 steps (A-B-C), A is a backward step, B a smaller forward step, and C usually a more powerful backward step that ends the consolidation.
In order to be able to explain current price action, and make predictions, one must analyze the stock going back as early as possible and assign the major wave progressions on the longer times scales of years, months, weeks. For this stock it is sufficient to go back to the lowest price after the collapse of this stock from double digits to 36 cents. Thats the start of this analysis, as it represents a new bull cycle for this market.
Continued.... (due to size)
You've drawn the triangle correctly, and I think you are wondering which direction comes next.
This triangle formation has been a text book case of a continuation pattern. The overall trend is bullish, therefore this is a bullish formation. It is NOT an indication of declining prices. Prices may decline for other reasons though. The triangle was perfect, except for the last wave (E) within the triangle, the last descent from the top trend line to the lower trend line. It should have been a zig-zag (A-B-C), and that pattern held nicely at the end of the pattern for a day, but then it turned into a 5-wave sequence breaking the trend line by quite a bit of margin. E waves are known to sometimes break out of the triangle, or be too short at times as well. It's the structure of that wave though that disturbs me the most.
After contemplating, I still think this is just a fake breakdown, expressing the pessimistic mood of traders fearing weaker prices. E waves are at the apex of trader's disappointments, just when the market is about to turn around.
Let's observe the price action closely in the next few days. The answer should not be far.
Looking at your chart again, I overlooked that you actually did not draw the triangle correctly.
The triangle should only cover the price bars that are beyond the peak in time. It should not be drawn into the major trend. Please compare with my chart and you'll see the difference.
Technical Analysis -- Why does URRE not perform as others?
My descriptions here are rather terse, sorry, no time for more right now. I am concentrating on the current aspects of this consolidation and the immediate future.
In the chart, I labeled relevant peaks and valleys accordingly with colored numbers and letters.
Follow the numbers of one color along the price bars to count waves.
The peak at 3.98 was a strong wave 3 to 3.98 which is now being consolidated in wave 4. Initially it looked like we were getting just a simple zig-zag (ABC) wave completing the consolidation at 2.65, but it turned into a more complex formation, a triangle which happens when there are a lot of cross-currents between moves by the bulls and bears.
The price has been oscillating up and down between converging trend lines. You may have noticed that the price movements have gotten smaller from extreme to extreme in the past few weeks and days, and they happen very quickly now with 20-30 cent moves per day, peaking up or down rapidly, indicating that momentum is compressed in a smaller channel.
These triangles consist of a total of five waves (ABCDE) and I think we are almost done with it, it's not quite clear just were in progress the last wave is because the are so small now. Each sub-wave of a triangle consists of a zig-zag move. The stock may need to go down one more time into the 2.90s to finish wave E, no lower perhaps than 2.95, where the bottom trend line is now.
As soon as this last wave is complete, I am very confident that the stock price will almost literally explode upwardly and the first target for this is in the area of 4.25 to 4.40. This will likely happen within days since the end of wave E is near.
From a technical point of view the time to buy into the market is on this last dip completing wave E, or perhaps less risky at the time when the price leaves the triangle upward, if you can catch it.
Price targets are determined with Fibonacci projections and retracements. URRE adheres very well to standard price proportions of wave cycles.
The target price of the next move is given by the height of triangle or alternately by the size of the first wave in a sequence. Once we break out of the triangle here this would be about 4.25 for the end of wave 5 (blue). Blue wave 5 also ends green wave 3, since it completes a full sub-wave cycle. We can estimate the end of green 3 also from the Fib ratio of 261% of wave green 1 of 2009, since that FIB ratio is close by at $4.39. So this give us a conservative target for a trade. It may go beyond that, but there should be some good resistance in that area. If that resistance holds, the market will turn around and consolidate wave green 3 in green 4, and I think this will be the time of Summer this year, when all miners pull back a bit, getting ready for a Fall rally in wave green 5, as shown in the chart.
Perhaps this explains a little why not all uranium stocks move exactly the same time. They all have their own rhythms of dealing with the emotions of their traders. Each stock must be analyzed separately to explain its behavior.
URZ had a very similar pattern, the triangle, but was a bit ahead in its timing. We should see URRE follow suit shortly.
The accuracy of wave pattern analysis can be stunning, even in terms of price targets, but it's difficult, and requires experience of studying charts and learning the principle.
Hope this was illuminating....
Thanks for taking your time to analyze this stock movement.
It all makes sense in trading world. the pop # 5 just coincident with what we are waiting for: The news. The #4 point is a drifting part consisting frustration & impatience. As soon as volume piking up, we are in the go ... up.
Do u believe this fall down to 2.67 on 24th 2011 is still due to the last faze of the Eliot indicator before the upward trend ?
I have an amount of these URRE's and wondering to sell or to hold.
It does not take an expert to figure out that my technical analysis of the triangle was wrong. But now it seems so obvious that the market has told me so.
The sharp drop in prices since exiting the triangle is exactly what should have happened to the upside. The triangle worked just fine, but why down? Now the reason seems so obvious.
The triangle is upside down! It is continuation pattern of the downward action of the consolidation, not a continuation pattern of the existing overall uptrend.
There are several kinds of consolidation patterns. One is the triangle formation, its a complex and mostly sideways correction taking a lot of time.
Then there is the sharp correction, a simple zig-zag move down which happens fairly quickly but retraces the preceding trend very deeply, often 50 to 60%. It consists of 3 moves, a down wave A, a counter wave B upward, and another downward wave C.
It turns out that this is the overall pattern that is in effect for URRE, only with one big complication. The middle wave B has been replaced with a triangle. Therefore, after the triangle completes, prices continue on downward.
Since we have left the triangle, we have seen wave C, the final wave of the consolidation progress as it should.
I am sorry, I made the mistake of not recognizing it earlier. But as you can see this is complicated stuff. I misinterpreted the meaning of the 2nd highest peak on the chart, never reconsidered it carefully enough, and was misguided by the overwhelming display of the triangle.
This all makes perfect sense now. Hindsight is always 20/20. I could have made my purchases at a much better time. Now is the time to buy this stock. It is only a matter of time when the bottom of the downward C wave will end, if it hasn't already today. That was a pretty sharp dagger.
To answer a question, yes this is the last phase of the consolidation. I can't say for sure that we've seen bottom, but at this point we are close. We have retraced the bull trend for about 55%. A sharp zig-zag correction usually retraces between 50% and 62%. Prices for that are 2.56 and 2.22. So we should expect not much more loss, if any.
good work. DNN completed its break of overhead resistance today. Same technicals. I hope we get one more move down to $2.95-3. in URRE, but traders may jump the gun and just take it up now since DNN is moving. Vol certainly suggests so.
Yes, volume picks up in the last leg, a sure sign it's going to pop soon. I do think we will get the excursion into the 2.90. After the open this morning it became apparent that the market just completed triangle wave d, a little higher than the previous attempt, the theoretical peak would have been 3.45 to make it a triangle with perfect Fibonacci ratios. I guess we can still get that, but it won't be the break out just yet.
ok, that finally worked. Yahoo must be putting some kind of size limit on posts during the day.
My thoughts on correlation with mining stocks in general:
The immediate future for mining stocks is still murky I think, as the major metals, particularly Au and Ag might still not have finished their corrections, but I have the feeling that uranium trades rather independently from them, so these miners might not be effected much. After all, the spot U3O8 price is climbing relentlessly, it seems. URZ is a good example of this, as it has recently already broken out to new highs. My overall suspicion is that this year the precious metals will not be the front runner in the mining sector, but other players, especially uranium and rare earth metals might turn out to be the leaders.
RE: "shouldn't you use an exponential chart when using EMA? "
No, moving average are not dependent on the kind scaling you use for your chart. EMAs just give more weight to the most recent price action. Using EMA vs SMA is mostly a personal preference. I also look at simple averages often.
Ok, the triangle baseline seems to be providing good support now for the market. It's building a base here on 2.96. The lowest price that I see since the peak at 3.01 (wave 1) is 2.95. Perhaps that is the start of wave 3. If so, I see immediate upside potential for tomorrow at 3.17 (162% extension) and perhaps 3.31 (262%).
Don't blame others for buying in at the wrong time. The chart is always right. But there is nothing to worry about. Turn your tube off until Monday to feel better, or add to your position below $3. Simple as that.
The triangle formation that we are seeing is one of the most reliable chart patterns there is. The odds of substantial gain out of this is virtually 100%.