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Analysis

Uranium: An Attractive Long-Term Contrarian Play

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If you are a contrarian investor, then you should have a look at Uranium. In 2011, Uranium hit a high of $73 a pound, which itself was about 50% below the highs of around $140 per pound reached in 2007. At the current levels of $20.5 per pound, Uranium is down more than 85% from the highs.

Key Findings

  • Uranium prices are in a long-term downtrend since the Fukushima incident in 2011
  • Demand is likely to pick up in the next few years with new plants under construction
  • Supply is constrained with world’s top producer Kazakhstan reducing its output by 10%
  • Uranium has strong fundamentals, however, price realization might take some time
  • Use a staggered approach of investment. Buy only for the long-term
  • High risk – High reward investors can buy URA ETF, while the risk-averse can buy NLR ETF

So, Uranium prices are low – that’s established. But, what has changed now that qualifies Uranium as a buy? Read on.

What was the Reason for the Collapse in Prices?

The first commercial reactor in Japan was commissioned in mid-1966. Since then, Japan added around 50+ reactors by 2011 that supplied about 30% of the nation’s electricity, which was expected to increase to 41% by 2017 and 50% by 2030.

However, after the 2011 Fukushima accident, which was one of the worst nuclear disasters since the Chernobyl incident in 1986, nuclear adoption took a back seat and all nuclear reactors in Japan were shut. Post the accident, new stringent tests are undertaken before allowing any nuclear facility to start operations. The status of the Japanese reactors is shown in the image below.

The World Nuclear Association said:

Currently, 42 reactors are operable and potentially able to restart, and 24 of these are in the process of restart approvals. The first two restarted in August and October 2015, with three more since.

However, it wasn’t Japan alone that shut its reactors. The Fukushima incident led Germany to shut eight of its 17 reactors with the remaining to be phased out by 2022. Spain, Belgium, Switzerland are also moving away from nuclear power.

A few other nations that had planned or were in the process of constructing nuclear plants have abandoned them and others have pledged to remain nuclear free. This led to a massive drop in demand and painted a bleak picture for the future. As a result, Uranium prices nosedived.

What has Changed Since then?

The current Japanese Prime Minister Shinzo Abe is a supporter of Nuclear technology for meeting Japanese electricity requirements.

Our resource-poor country cannot do without nuclear power to secure the stability of energy supply while considering what makes economic sense and the issue of climate change..

Abe told a press conference back in 2016.

Hence, expectations that Japan will again restart at least part of its operable Nuclear plants is a positive.

Additionally, a number of developing nations like China, India, and others are turning towards Nuclear technology to feed the increasing electricity requirement of the rising middle class. Using fossil fuels has led to huge pollution problems, which can only be tackled either by nuclear technology or other clean energy resources. Hence, these nations are turning away from fossil fuels and nuclear technology is likely to be one of the major beneficiaries along with natural gas and renewables.

As of May 1st, 2017, there were 447 nuclear reactors in operation globally and 59 reactors under construction. However, World Nuclear Association says that 170 reactors are planned while 372 have been proposed. These will boost Uranium demand in the future as and when they get commissioned. Readers can read the details and the countrywide breakup here.

Demand Likely to Increase in the Next Three Years

There are various estimates by different organizations, for high, mid and low levels of demand, as shown in the chart above – sourced from the IAEA. Demand is likely to increase in the next three years, beating production during the same period, because the world’s top uranium producer Kazakhstan has planned to cut its output by 10% in 2017.

State-owned uranium company and global production leader, Kazatomprom Chairman Askar Zhumagaliyev said in a statement:

These strategic [uranium] assets are far more valuable to our shareholders and stakeholders being left in the ground for the time being, rather than adding to the current oversupply situation.

Source: Mining.com

This is a major development because Kazakhstan has been increasing its production in the last few years. Its production increased from 19451 tonnes U (tu) in 2011 to 24575 tU in 2016. A 10% cut will reduce its production by 2457 tU, which is equal to what the nation had produced way back in 2013.

In 2016, the total global production was 62027 tU. For 2017, the total demand projection according to the World Nuclear Association is about 67,867 tU. Though the demand is higher than the supply, in the last six years, there has been a huge inventory build-up due to the absence of Japanese consumption. Hence, this inventory will act as a secondary source of supply for the next few years.

Nevertheless, lower supply and higher demand will push prices higher in the next few years.

Analysts are also Getting Bullish on Uranium

We expect global uranium demand to rise roughly 40% by 2025, a staggering amount for a commodity that saw next to zero demand growth in the past 10 years…

said Morningstar analyst David Wang. He has a target of $37 a pound for this year and $65 by 2019, reports Market Watch.

From a fundamentals standpoint it’s pretty clear that demand for uranium is going to rise given what we know of nuclear power construction activity over the next 10 years,” said John Robertson, executive director at EIS Capital Management. “It might be a little while before there’s a noticeable improvement in the fundamentals of the uranium market but I think that the downside risk from an equity point of view has been greatly reduced…

reports The Australian.

Risks to our Analysis

With different options like wind, solar, natural gas, etc. available, chances are that the countries will opt for them over the riskier nuclear energy. Any untoward incident in any nuclear plant will signal the end of nuclear energy and Uranium prices will sink further.

What do the Charts Forecast?

The weekly chart shows that Uranium futures are clearly in a downtrend, however, there is a bottom formation in progress. We will get our first indication when Uranium prices breakout of the downtrend line and move above it, which should be close to 24 or 25 levels. A confirmation of a likely double bottom will be signaled when price breaks out of the recent swing high of 27.5. The pattern target of the double bottom is 37.5.

On the daily charts, we find that price has broken out of the 20-day EMA and the downtrend line and is approaching the 50-day EMA. Uranium prices are showing first signs of bottoming out.

How do we Play This uptrend in Uranium?

There are two ETFs that focus on the uranium market. The Global X Uranium ETF (NYSEARCA: URA) and the VanEck Vectors Uranium+Nuclear Energy ETF (NYSEARCA: NLR).

While URA consists of uranium mining companies, its portfolio contains a number of penny stocks, making it the riskier of the two. It has a five-year return of negative 18.67%. Also, among its top 10 holdings, it has five stocks that are quoting under a dollar and its top two holdings make up 33.54% of its assets. This ETF can be a good play when uranium prices gain momentum, as then the penny stocks will jump higher.

For now, we believe that NLR is a better and safer option for the investor. It has a five-year return of 7.39% and a year-to-date return of 7.54%. The ETF has better quality stocks in its portfolio. However, the risk involved is the low assets under management of only $31.39 million and a large bid-ask ratio. It is also skewed with companies listed in the US and Japan. It, therefore, misses out on the companies from France, Canada, and others.

Therefore, investors who want a high reward for their investment but are willing to take a higher risk should buy URA, whereas, investors who are risk averse should buy NLR. We expect a 40-50% return on investment in the next two to three years.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 9 rated postsRakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.




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2 Comments

2 Comments

  1. gullyfoyle

    July 2, 2017 at 4:15 pm

    Thanks for the analysis, was interested in uranium about a year ago. Thanks for bringing back to my attention.

  2. GRACE88

    July 3, 2017 at 12:23 am

    Thanks for the update.

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Analysis

Crypto Update: Market Still in Deadlock

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The choppy, directionless period in the cryptocurrency segment continues, with no meaningful change in the technical setups of the major coins. While the broader trends are still clearly bearish and sellers remain in control of the market, we saw another minor bullish shift in the past 24 hours, with modest gains across the board.

Most of the top coins are trading in the range of the Monday session, which saw the spike triggered by the turmoil in Tether. Stellar is the apparent positive outlier of the past few days, while Dash, Litecoin, and Ethereum have been the weakest so far this week.

DASH/USD, 4-Hour Chart Analysis

On a positive note, all of the majors remain above last week’s levels, and especially Bitcoin’s continued stability is encouraging for crypto-bulls here, even as our trend model paints a negative picture of the segment.


BTC/USD, 4-Hour Chart Analysis

Bitcoin avoided a test of the $6275 level despite moving below its recent very narrow trading range yesterday, with still no meaningful bearish or bullish momentum present in the coin’s market. BTC continues to trade below the $6500 level, and its volatility is very low, even after the move below the previously dominant broad triangle consolidation pattern.

Further resistance levels are still ahead near $6750 and $7000, while support levels below $6275 are found near $600, $5850 and between $5000 and $5100.

Altcoins Little Changed as Ethereum Still Glued to $200

XRP/USD, 4-Hour Chart Analysis

The weekend has been very quiet for altcoins so far, with even the recently active Ripple settling down near the $0.46 level. XRP is around the midpoint of Monday’ s range but the lack of follow-through after the breakout from the triangle consolidation pattern is a negative sign, and the coin remains on a short-term sell signal in our trend model. Strong resistance is still ahead at $0.51, $0.54, $0.57, while support is found near $0.42, $0.375, and $0.35.

ETH/USD, 4-Hour Chart Analysis

Ethereum continues to hover around the $200 price level still being in bearish short- and long-term patterns and the relative weakness of the second largest coin remains a huge concern for the whole segment.

With no evidence of meaningful capital inflows to the market, the outlook is neutral at best, and traders and investors should wait for at least a short-term trend change before entering new positions. Strong support is found near $180, $170, and $160, while resistance is ahead near $235 and $260.

EOS/USD, 4-Hour Chart Analysis

EOS is also among the relatively weaker coins, and the coin is stuick in a broad Trading range around the $5.35 level since August. Volatility in the coin’s market has been progressively declining, but the vicinity of the bear market low suggests that the long-term downtrend is still intact, especially given the segment-wide trends.

A test of the lows is still more likely than a bullish break-out, with strong support found near $4.50 and key resistance ahead near $6 and $6.5.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 380 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Cardano Price Analysis: ADA/USDT is Eyeing a Big Move Out of Current Technical Setup

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  • Positive update from IOHK audit of Icarus by Kudelski Security.
  • ADA/USDT is moving within a pennant pattern formation, subject to breakout.

Solid Icarus Audit reported by IOHK

IOHK recently announced in their forum that an audit was conducted by Kudelski Security, which is an independent and third-party security audit firm. The audit conducted demonstrated that the Icarus project implementation for Cardano looks all good and set to go, without any major problems. However, a few changes may need to be executed. IOHK developed the Icarus code as a reference implementation, for Cardano light portfolio.

The important of “independent audits, like this one was stressed by IOHK. Stating “they are critical for identifying security issues in the Icarus wallet, that may not have been identified by internal audits”.

Furthermore, IOHK has elucidated Icarus as an open source code base serving as a reference for the creation of safer and easier mobile wallets for Cardano. They said, “this guarantees our customers and clients the safest portfolio we can offer.”  Given the benefit of an external audit, the developers can resolve any problems identified during its product launch audit.

Positive Updates from Cardano Founder

Cardano’s founder, Charles Hoskinson, was recently commenting on Cardano’s future. He said “We have so many amazing things coming out.”

Mr Hoskinson further added that one of their scientists has flown in from Switzerland. They will be doing a video, which will be the first time they have ever talked about their sharding design that we have for Cardano. Further commenting on other updates, including videos about Shelley and the Rust project.

Technical Review – Daily Chart

ADA/USDT daily chart

ADA/USDT is moving within a triangular pattern or a pennant formation, as seen via the daily time frame. It is narrowing, moving closer to a breakout. Ranging ahead of another drop to the deep south. Although, fundamental developments coming out from the Cardano foundation, remain very much upbeat currently.

Over the past 8 days, the price has been grinding higher, after receiving support at the lower trend line of the above-mentioned pattern. In terms of resistance to the upside, this can be seen at 0.08310000. The upper tracking trend line. Further north, a supply zone is running from 0.09000000-0.09500000. ADA/USDT  last traded here on 23rd September. Finally, support is tracking at 0.071800000, lower part of the pennant, also within a demand area. Another strong buying territory is observed from 0.06500000-0.06000000.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 33 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Crypto Update: Top 10 Worst Performers Make Bottom Picking List

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Yesterday, October 18, 2018, Cryptoglobe published, a list of the 10 worst performing cryptocurrency investments of 2018. These altcoins suffered heavy losses of between 97% – 99%. With tremendous devaluation, it may lead you to think that altcoins or cryptos are dead. After all, other assets such as stocks or commodities may likely never come back to life after losing all but one percent of their value.

But this is crypto where coins nosedive one day and skyrocket the next. Cryptoglobe can show you a picture of tragedy, but us; we see opportunity. In this two-part article, we reveal how the top 10 worst performing cryptocurrency investments can make a good bottom picking list.

Zclassic (ZCL/BTC)

% Down from All-time High:

99%

Current Status:

Zclassic/Bitcoin (ZCL/BTC) is currently finding footing at its historic support level of 0.0005. In the last four weeks, the pair has been range trading between 0.0005 and 0.000074.

Bottom Picking Candidate?

An altcoin that’s down 99% is a great bottom picking candidate. Aside from the possibility of a technical bounce, you can expect whales and expert bottom fishers to accumulate positions at this level. So, you can either trade the range or accumulate with the best of them.

Weekly chart of ZCL/BTC

Game Credits (GAME/BTC)

% Down from All-time High:

98%

Current Status:

GAME/BTC is attempting to carve a bottom at the parabolic support of 0.000025. Over the last four weeks, the pair has been trading between 0.000025 and 0.0000346.

Bottom Picking Candidate?

Yes, GAME/BTC has the potential to generate a strong rally in the coming weeks. Volume spikes on September 23 and October 4 hint that someone is accumulating at these levels. More importantly, the market is flashing oversold readings on the weekly RSI. GAME/BTC has the essential ingredients of a powerful bounce.

Weekly chart of GAME/BTC

Bitcoin Diamond (BCD/BTC)

% Down from All-time High:

97%

Current Status:

BCD/BTC is currently trading inside a huge falling wedge on the daily chart. It is still bearish as it continues to generate lower highs and lower lows.

Bottom Picking Candidate?

No, BCD/BTC is not a great bottom picking candidate. However, the pair looks ripe for a breakout. The usual catalysts are present: flashing extreme oversold readings, nearing the apex of the wedge, and trading at all-time lows. Look for volume spikes as a sign of a breakout.

Daily chart of BCD/BTC

Ethos (BQX/BTC)

% Down from All-time High:

97%

Current Status:

BQX/BTC has been carving a bottom at 0.000045 for over a month now. Those who were able to buy at this level are lucky because BQX/BTC is looking ripe for a rally.

Bottom Picking Candidate?

Yes, if you can still manage to get as close to 0.000045 as possible. The volume surges in the last few days suggest that the pair is in the final stages of base building. On October 14, BQX/BTC printed volume that’s over 250% of its daily average.

Daily chart of BQX/BTC

SALT (SALT/BTC)

% Down from All-time High:

97%

Current Status:

SALT/BTC may already be in an uptrend but it seems that only a few people are looking. The 4-hour chart shows that the pair is currently generating a bullish higher low after pulling back from its first higher high in months. SALT/BTC looks bullish in our book.

Bottom Picking Candidate?

Yes, this pullback gives you an opportunity to buy the higher low. We expect SALT/BTC to trade near the support of the ascending channel as it consolidates.

4H chart of SALT/BTC

Bottom Line

In trading and investing, the worst performing cryptocurrency investments and other assets often provide the maximum financial opportunity. We’re seeing that in the first half of the list. We have a feeling that we’ll see more or less the same in the second half of the list. Stay tuned.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.7 stars on average, based on 252 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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