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This junior uranium explorer is generating buy signals Add to ...

Hi Lou,

The stock I’m looking at in uranium is Bayswater Uranium Corp. It’s pretty low now, but I’m optimistic about it with the current market. What do you think? Too high risk with the recent drop they had?

Kind regards,

Ivan

 

Hey Ivan,

Thanks for the assignment. This will be the first time that I examine the case for Bayswater Uranium Corp. (BYU TSXV). The company suffered with the rest of the industry as a result of the Fukushima disaster in Japan. The entire sector was put in neutral as governments around the world reacted to the event. The Japanese government shut down its 53 atomic power plants and moved to importing fossil fuel to fill the gap. The resulting higher cost of electricity and increased levels of carbon dioxide emissions have put nuclear energy back on the table. The recent announcement that Japan will allow atomic energy to come back on line has led to some recovery in the sector. However, don’t expect to see all of the Japanese reactors light up the grid in the short term. There are start-up costs of up to $1-billion per site and increased regulatory processes that will have to be managed. Some estimates suggest that it could take up to five years before all of the facilities are up and running. Also keep in mind that there are new plants coming on stream in China and India and that Russia is a leading supplier of yellow cake.

On a micro level you should also be aware that Bayswater only has a market capitalization of $4.06-million and is a choppy trader. These factors need to be part of your evaluation.  An inspection of the charts will form the basis of my opinion on how best to proceed.

The three-year chart indicates that downtrend that started in 2011 has at last been broken. The MACD and the RSI both generated buy signals as the stock moved off the December, 2013 low. Subsequently, a golden cross formed in January, 2014.

The six-month chart provides a closer look at the signals provided by the MACD and the RSI. The buy signal in early January, 2014 saw the shares run to $0.14 by the end of the month when they met resistance and pulled back to support along the 50-day moving average near $0.10. There was then another buy signal that surfaced taking the stock up to $0.22 by early March where a sell signal sent the stock down to just below $0.16 by the middle of the month.

From the research conducted on your behalf it would appear that there are some fundamental changes coming into the sector as governments shift from a neutral position into first gear.  Establish a core position and be prepared to trade for profit.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.



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