This Week’s Commentary – May 26, 2007 – Fat Bottoms

Continuing my series of irrelevant quotes at the start of my commentaries:

Hey listen here,
Now I got mortgages on homes
I got stiffness in my bones
Ain’t no beauty queens in this locality. (I tell ya!)
Oh, but I still get my pleasure
Still got my greatest treasure.
Heap big woman you done made a big man out-of me!
…………..
Fat bottomed girls you make the rockin’ world go round

– Queen, Fat Bottomed Girls

 

My 20% gains on the year have evaporated, and as of today I am flat on the year, which is not much to show for almost 5 month’s work. As I said last week, at these rates of return I should have put my money in T-Bills in February and taken the last three months off.

But I didn’t. And I’m not. Here’s why:

First, I still believe that there is profit to be made in the uranium market. Nuclear power is the only existing solution to global warming, the energy needs of the industrializing countries like India and China (and North America), and the solution to global political instability (without a need for oil, the U.S. would not be in Iraq). Uranium is not going away anytime soon.

Second, as discussed last week, we have seen numerous significant consolidations in the uranium market all the way up. The action over the last few weeks is not unusual. In fact, if you read some of the posts on the on the Buy High Sell Higher Forum, it was even expected (Check out davidslane’s post on May 18, and adriandunn’s post on May 22).

Third, the world is starting to take notice. Funds are starting to invest in the uranium sector (which explains CCO.TO Cameco Corp’s big rise, even though their mine is flooded and they have no production in near or medium term future). Uranium futures are now being traded on the NYMEX, which also increases visibility. More press coverage means higher prices as the lemmings pile in, at least in the short to medium term. (Long term these newcomers are who we will be selling to).

Fourth, it is increasingly likely that we are approaching a bottom. Check out the chart of FRG.TO – Fronteer Development Group Inc. for the last six months:

A low of $12.37 was made on May 17, and then the stock rose and fell back down to an intra-day low of $12.74 on May 24, before rising to close yesterday at $13.10. These levels are remarkably close to the last intra-day low of $12.15 on February 27. In other words, this recent consolidation did not break the February 27 low, and the May 24 low did not break the May 17 low. A series of higher lows is a good sign, and could indicate that we have reached a fat bottom.

(Yes, I know, there is no such term as a “fat bottom”. The technical analysts would call it a double bottom, and it generally indicates the start of a reversal of the previous trend. You can learn more and see an example in the double bottom article at stockcharts.com. However, I like the term “fat bottom”, because that’s what it looks like, and it ties nicely into the irrelevant quote I put at the start of this article).

Fronteer is not to only stock showing this pattern; I’ll let you search for your own examples.

Of course this could be merely a blip, and we may very well see further lows. However, as I said last week, I will continue to deploy more cash in the hopes that I’m right.

Crosshair – New (Old) Recommendation

Speaking of fat bottoms and deploying cash, I have started accumulating an old friend, CXX.V – Crosshair Exploration & Minining Corp.

As the chart shows it would appear the downtrend has been broken, and it appears that a fat bottom has been made around the $2.60 level. (See, that term “fat bottom” is starting to catch on). In addition to now trading on the AMEX, which increases exposure, on May 24 Crosshair announced decent drill results, which unfortunately were overshadowed by the big correction on Thursday (thanks to Forum member dangor2 for mentioning this). Finally, as mentioned on the Crosshair web site, “Crosshair continues to also advance its gold and Volcanic Massive Sulphide (VMS) projects in Newfoundland, which are slated for a dividend spin-out to shareholders in the 2007 fiscal year.”

I like it, and I have taken a small position, which I plan to increase if the stock moves to the upside.

Cool Web Site

Thanks also to forum member davidslane for posting a link to the Resource Stock Guide web site, which contains detailed information on virtually every resource stock out there, including gold, silver and uranium stocks. As davidslane says, there is almost too much information on that site, and he asks others for their thoughts on how to utilize this information, so please take his suggestion and post your thoughts on how this information can best be used. The point of this site is to use our collective brains to make us all more money, so let’s use them!

The Week Ahead

I plan to continue this week what I did last week; slowly accumulating more of the good stuff while it’s low. Last week, in addition to buying some CXX.V – Crosshair Exploration & Minining Corp., I picked up a bit more of PNP.TO – Pinetree Capital Ltd., a bit more MGA.TO – Mega Uranium Ltd. , and I started buy UEX.TO – UEX Corp. and UUL.TO – Universal Uranium Ltd. I haven’t written up those last two stocks, so time permitting I’ll post some further thoughts this week.

Thanks for reading, and thanks to all of you who share your thoughts on the Buy High Sell Higher Forum; good luck this week, and let’s hope that we have indeed seen some fat bottoms.