Today's assignment from George is to examine the scenario surrounding Denison Mines Corp. (DML). DML is involved in uranium exploration and development in Canada, Mali, Mongolia, and Zambia. In the August 2014 investor presentation management announced that there are plans to dispose or spin out the international assets to create a pure play on the assets in the Athabasca basin of Saskatchewan.
This will be the second time that I parse the details associated with DML. The last was on March 3, 2010, when the shares were trading for $1.47. Peter wanted to know if the stock exhibited any signs of life. The research indicated that DML was meeting resistance along the 200-day moving average and that what the company and the sector needed was an increase in demand for yellow cake. The shares retreated to a low of $0.98 in July 2010 where a double bottom signalled a trend reversal which took the shares to $3.71 in February of 2011. Unfortunately that was the top as the consequences of Fukushima knocked the stock off the peak.
Another inspection of the charts will help identify the opportunities associated with this investment.
The three-year chart is another example of a stock that has offered regular opportunities to trade for profits. Lots of pops and drops to exploit. What is evident is the lift off the October 2013 lows and the advance to the spike high of $1.95 by late February of 2014. The subsequent decline to the 52-week low of $1.02 in November of 2014 was followed by another pop to resistance along the 200-day moving average. Similar to the the other uranium stocks undertaken with this assignment, the MACD and the RSI both generated buy signals in October of 2014 ahead of the flash move higher.
The six-month chart provides a close up of the oversold situation that existed in October and the aforementioned buy signals generated by momentum indicators. What is also evident is the double bottom that formed and the pennant that surfaced after the November spike. A pennant is a continuation pattern suggesting that investors can expect more buying to follow.
If the price of uranium can make its way to $50 per pound over the next year, which has been the main thesis of the assignment, then the rising tide will lift all the boats.
Make it a profitable day and happy capitalism!
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