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)
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....
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.
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.
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%.
Yes, good TA does require some volume and time to build price history. The methods I am using only apply to markets that are traded frequently enough, but that is a very relative term. But that issue is trading close to a million shares a day, that's plenty of volume. Day traders may not like it, because liquidity may not be enough for large orders.
I did notice that the stock just got life recently, but the first sets of waves are well developed and make good sense already.
I know you like technical support to be long, like most people on these boards. But I will tell you my analysis is not biased in support of bears or bulls. When I analyze a chart, I don't care which way it goes. If I don't like it I don't have to enter the market, or I just sell, there are plenty of markets to choose from. What do they say in Cramerica, winners make money, losers loose money, and the pigs get slaughtered. Don't hold on to losers or winners too long. I like stocks to go up, no doubt. That's the path of progress, achievement and success. But to make good calls in the market an analyst has to take the opposing position often and work out all scenarios equally. After that, based on the outcome of a probability analysis one decides to be long or a short, not the other way around. It's a game of risk management.
Yes, I think you will see $3 at least once by the end of the day. We may even close the gap. The 61.8% retrace level is 3.09, a reasonable immediate recovery actually, given the volatility of these stocks.