From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.
As we were reviewing our charts, there was one recurring theme that kept popping up...
Pullbacks and retests.
The CRB Index retested its breakout zone near the 2018 highs ~206.
Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions.
Iron ore fell right back to check in on its 2013 highs.
And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline.
But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.
Of all these retests, one that stood out most was Uranium.
Let’s take a look.
Here’s the monthly candlestick chart of the Uranium ETF $URA: URA is a perfect example of a big base breakout followed by a hard retest of former resistance that is now acting as support.
But today, the focus isn’t on big bases. It’s on the implications of this failed move.
Whipsaws are one thing, but when we see them occur at key levels like the one above, we want to pay all the more attention.
As you can see, bears tried to knock URA back below a critical zone of former resistance, but bulls came right out and drove prices back above those 2017 highs.
It’s polarity 101: Former resistance has now become support.
And it’s extremely bullish.
As long as URA is above 19.25, we want to be long with a target of 56 over the next 3-6 months.
Over longer timeframes, it wouldn’t surprise us one bit to see prices back above 100!
After all, if you’ve been reading our column this year, one thing you should know is that when commodities trend, they really trend.
Our risk is well-defined at those former 2017 highs, but we have no business owning URA if we’re below there.
That’s our line in the sand.
Looking at the daily chart of uranium futures now, and seeing as they recently sliced to their highest level since May ‘20, the price action is more than confirming what we see from uranium stocks: Seeing this strength from the underlying commodity makes us like this URA trade even more.
We said it before… from failed moves, come fast moves in the opposite direction… and that’s what we’re seeing in uranium right now.
As technicians, one of our main jobs is to identify major trend changes. And that’s precisely what appears to be taking place here.
Uranium has been in a primary downtrend for a decade. It built out a strong multi-year base. And now it’s resolving higher and kicking off a fresh uptrend.
We want to take advantage of this opportunity and turning point in the primary trend and ride it higher until price dictates otherwise.
With that in mind, we’re going to dive into some uranium stocks to find the cleanest and best risk/reward opportunities in this emerging space.
Stay tuned, and we’ll share our favorite setups with you early next week.
