The last time we wrote about uranium mining company Cameco Corp, the stock was hovering around $25.30. The daily chart revealed a setup similar to a complete Elliott Wave cycle pointing north. So, we thought another notable upswing was likely to follow soon. And indeed, it didn’t take long for the price to reach $32.49.
However, it hasn’t been able to exceed that high for over a year now. Instead, CCJ has been trading in a narrowing range between $31 and $21 a share. Last Friday, it closed at $24.04 and we think it is time to take another look. The updated chart below suggests a very interesting and rather unusual pattern is forming.
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Cameco ‘s daily chart depicts a five-wave impulse, labeled 1-2-3-4-5 in wave (1) to $28.49, whose wave 5 is an ending diagonal. It was followed by an a-b-c zigzag down to $18.03. The corrective phase of the wave cycle could’ve ended there, but the following developments suggests it didn’t. Instead, it appears wave (2) is still in progress as an A-B-C expanding flat correction.
In most expanding flats, the B-wave is a simple a-b-c to a new high/low. In this case, however, wave B seems to be an a-b-c-d-e triangle correction. That doesn’t change the fact that a complete expanding flat includes an impulse in wave C. If this count is correct, we can expect more weakness in wave C towards the support of wave 4 of (1) near $15 a share. In other words, as long as it trades below $29.73, Cameco can tumble by roughly 40% before the bulls return.
The company’s valuation is rather demanding, as well. Even at the peak of the uranium bubble in 2007, the company was making just about $1 in earnings per share. Whether the Westinghouse acquisition and the anticipated “nuclear renaissance” can make Cameco significantly more profitable remains to be seen. In the meantime, our portfolio includes 19 stocks we like a lot more than CCJ.
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