Gone are the days when uranium stocks and the exchange traded funds are being subjected to second-class treatment.
In 2011, in the wake of the nuclear disaster in Fukushima, Japan, such treatment was justified. Not this year. The Global X Uranium ETF (NYSEArca: URA) is up 24.4% year-to-date, making it one of the top non-leveraged ETFs this year. On Tuesday, URA surged 4.1% on volume that was five times the daily average. Not surprisingly, URA’s technical outlook is improving in dramatic fashion.
“Despite strength in leadership stocks, we have also been noticing a stealth sector rotation of institutional funds flowing into various commodity ETFs. One such ETF we are stalking for potential buy entry in the coming days is URA,” according to Deron Wagner of Morpheus Trading Group.
Wagner goes on to note “URA blasted through the high of its prior trading range and 40-week moving average, on volume that was about 400% greater than average. High volume on a breakout is important because it confirms the presence of institutional accumulation.”
URA’s encouraging technicals are backstopped by compelling fundamentals. Last week, Japanese Prime Minister Shinzo Abe’s administration announced details of the new Basic Energy Plan, which designated atomic energy as an integral part in meeting the country’s long-term electricity needs, reports Hiroko Tabuchi for the New York Times.
The energy plan outlines steps to restart reactors that were closed following the Fukushima Daiichi nuclear plant disaster in 2011 and overturns a promise by the previous administration to phase out the country’s nuclear reactors. [Japan Lifts Uranium ETF]
Said another way, Japan, which once looked as though it had forsaken nuclear energy, is renewing its commitment to the energy source.
Japan, formerly Asia’s largest nuclear power producer, could restart one in every five reactors this year, pushing uranium prices to about $50 per pound, according to analyst estimates. [Favorable Trends Boost Uranium ETF]
“Since breaking out above its recent highs on heavy volume last week, the price has been consolidating for a few days on declining volume. Lighter volume during bullish consolidations is positive because it indicates the sellers are not stepping in while the bulls take a rest,” said Wagner.
Global X Uranium ETF
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.