This Week’s Commentary – May 12, 2007 – Bigger is Better?

The volatility continues, mostly to the downside.. Last Friday I was up 9.4% on the year; today I’m up 8.3% on the year, so it was a losing week, thanks mostly to the action on Thursday.

I currently hold seventeen different stocks in my portfolio. This past week three of them were up, meaning 14 of them fell. That’s not a great week.

My biggest winner was DML.TO – Denison Mines Corp., which was up over 15% on the week. Denison currently represents 7% of my portfolio, and it’s this over-weighting that saved me from suffering more damage.

As the chart shows, the MACD is still at a good level, but the RSI is a bit toppy, even after Friday’s pullback, so this one is a wait and see. Have we reached a double top? Or is this just a pause before we move higher? We will know this week. For now, I’m holding.

My only other two winners were PNP.TO – Pinetree Capital Ltd. and SXR.TO – SXR Uranium One, Inc., both of which look as though they have consolidated to what may be appropriate buy points.

So what does this mean? Why are Denison, Pinetree and SXR all on the rise? What’s different about these stocks as compared to my other stocks that were down this week? (I’ll pause while you consider the answer…….)

It appears to me that these are all “large” stocks, with both Denison and SXR actually in production. To test this theory, I examined the performance of other “large” uranium stocks this week, and low and behold, they were also up. Check them out:

• CCO.TO – Cameco Corp. – up 2% on Friday, and up .79% for the week (and up 8.71% over the last month).
• URRE – Uranium Resources Inc. – up 1.36% on the week, but down 1.3% over the past month.

Some of the other “close to production” stocks, like PDN.TO – Paladin Resources Ltd. were down this week (about 2%), so this may or may not be a “large” issue. (Of course Paladin has other issues in play regarding Summit right now which may impact on the price).

I plan to keep an eye on these large stocks this week. I see no point in owning Cameco, since with the Cigar Lake flood no-one knows when they will be back in production. However, it appears that the psychology of the uranium market is changing. What’s the change? People are waking up.

There have been stories about uranium in the press. As of one week ago you can now trade uranium futures on the NYMEX. When the world wakes up, what does the world do? They rush to what they know. Try this test: phone up any broker and tell them you want to buy stock in a uranium company; without doing any research, most of them will suggest Cameco. Hence, the lemmings are all rushing into a stock whose mine is underwater. It makes no sense, but that’s the way it is.

I have avoided owning Cameco because their mine is under water, and it would appear that management has not been entirely honest about the long term remediation prospects. However, my feelings don’t matter. What matters is what does the market think? Apparently the market thinks Cameco is a good stock to own.

Therefore, my plan this week will be to watch Cameco and Uranium Resources Inc. (the largest uranium producer other than Cameco traded on a U.S. stock exchange, making it easier for the American lemming brokers to find without searching to the stock market in the Great White North). If they have a down day, I will start buying small quantities, purely for speculative purposes. I’ll hold them for a small profit, say 5%, and then sell.

They won’t be long term holdings, and I won’t put any serious money into them, but if the market wants to hand this to us, I see no reason not to take advantage of the big “LV” (Lemming Volatility, a term I just invented, and unless it catches on, I will probably never use the term again).

If you think I’m crazy, feel free to leave your thoughts on the Buy High Sell Higher Forum, and let’s see what happens this week.