In all honesty, after the recent run up to $73, along with the recent worldwide nuclear energy debate, a 9.8% drop-off is less than expected. However, on the flip side of that coin, additional spot price drops could be on the way.

As we all know, uranium stock prices are being hammered. Volume for Cameco was over 12 times that of the previous session, post earthquake.

Oddly enough, option call/put interest in CCJ is nearly 2:1, surprising considered the recent price drop.

The current environment makes it difficult to speculate on future Uranium Spot & stock prices. Politicians worldwide will hold a huge influence over the uranium markets mid-term fortunes or failures. Will the media continue to their current fear tactics towards nuclear power. Although all three damaged reactors are at same plant (and the rest of Japan’s reactors remain intact) is not the real issue. Perception is reality. Depending on the final outcome at the Fukushima plant, Uranium stocks could be regaining recent losses or plummeting to 52 week lows.

Here’s a chart that’s been making the rounds around the net regarding Uranium production vs consumption:

CCJ has had a great run-up of late and hit a 52 week high during inter-day trading on November 9th, reaching $38.56 US.

Considering that the stock was under $30 mid-day on October 30th and it’s fair to say that Cameco is on a roll.

Recent China Uranium power news (they are committed to exanding their nuclear power consumption considerably) pushed volume rates to more than 3 times the normal average.

January 2012 options remain bullish, with $40 strike levels currently trading at a $4.10 premium, although put side action in the $30 and $25 strike levels remains heavy.

Has the market topped out? We’ll have to see. The options market appears to be split. As always, time will tell.

Some of the highlights include

CEO Jerry Grandey shared the following quote:

The long-term fundamentals of the nuclear industry are positive. Cameco is prudently investing today in production growth and new technology to pursue our vision to be a dominant nuclear energy company.

A week later Cameco shares are trading relatively flat ($24.61 pre-announcement to $24.65 one week prior).

Via Investopedia

This past week, President Obama announced an $8.3 billion loan guarantee for the first new nuclear power plant to be constructed in 27 years…The case for nuclear energy is gaining steam in the U.S. as the president wants to triple the previous loan guarantee program to nearly $54 billion dollars and develop a plan for dealing with the generated waste.

Nuclear power plant producers have witnessed a nice push upwards after the announcement, yet actual Uranium U308 plays have received less than stellar bumps.

For example Denison gained less than 1%. Cameco pushed up only 3%. One way to gain full exposure to the overall nuclear energy category, yet not be fully exposed to the up-down nature of uranium stocks is to enter an ETF.

Market Vectors Nuclear Energy ETF (ticker NLR). Here are the funds top 10 holdings as of Feb 22nd, 2010:

As we can see the ETF does hold a large percentage of familiar names. Here’s the breakdown of the fund on a percentage basis.

With expense ratio’s capped at 0.65% this ETF offers an attractive option for those looking to expand out into the nuclear industry, all the while not being tied exclusively to uranium plays.

Most point to a recommendation by Jon Najarian on CNBC. He claims that the option activity on Cameco represents a ‘tell’ and that the stock should be moving higher based on in-the-know institutional investors.

Note the large price and volume movement on the 20th and 21st.

At least short-term options movement supports Najarian’s claim, as the call to put ratio is close to 4-1 for the front month November contract.

Cameco came out with a positive earnings report this week, upping estimates and sharing some future growth plans.

CCJ crushed the forecast, posting a second quarter EPS of $0.36 vs a $0.25 forecast (these figures are in Canadian dollars).

Chief Executive Jerry Grandey regarding the company filing for up to $1 billion in new debt:

“Cameco watchers may see this filing as a sign that we have identified a specific acquisition target. Let me merely restate that Cameco intends to maintain the financial flexibility to take advantage of opportunities when they might emerge,”

Cameco continues to use the current depressed spot market prices to their advantage, buying a large portion of uranium on the spot market and turning around and selling it in the future for a profit.

Daniel Rohr, an analyst at Morningstar said the following regarding the spot market purchase vs production:

“Their low cost ore in Saskatchewan will always be there. market opportunities may not always be there,”

This partially lead to uraniumn production falling 27% year over year. This was also attributed to planned maintanience at two key mines.

In a forward looking statement Cameco declared that they have the potential to double their annual production over the next ten years
CCJ raises its 2009 revenue forcast 5 to 10%.

Spot Price Swings

Last week spot prices took a big hit, losing over 10% of its value, dropping $5 to a U3O8 price of $47 per pound.

Yet this did not seem to affect share prices, as the majority of Uranium stocks stayed within 3% of their previous weeks prices.

This week the spot price gained back a portion of its previous losses, gaining a $1.50 to close at $48.50.

Until we witness tangible shifts in share prices that correlate with movements in the spot price we will shift our focus away from spot price fluctuations.

USEC Bounceback

The so-called media frenzy on the ‘hammering’ of Uranium shares following the USEC denied loan news appears to be over-blown.

From July 29th Tickerspy

Uranium stocks got hammered on Wednesday after the Department of Energy denied USEC’s request for $2 billion in loan guarantees.

Share Prices on July 28th and August 4th

Paladin: $3.99, $3.95
Denison: $1.72, $1.69
Cameco: $27.35, $28.56

Hardly the sector-wide destruction that some of the bears were anticipated.

Below is a percentage gain chart via Yahoo Finance. Cameco is represented by the blue line, the Dow in red.

Ok, so CCJ isn’t beating the Dow by much. But it’s still beating it. For the year it’s not even close, CCJ is dominating the markets. Of course, as a Uranium trader you already knew this… Still, with recent market fluctuations it’s a welcome change to be celebrating overall market strength.

The next few weeks should be an interesting time for the sector. Hilary Clinton is making a visit to India to discuss nuclear rectors and technology. And on August 12th Cameco will present earnings. Can the sector maintain it’s strength? The next few weeks should help us forecast the remainder of 2009 for the industry.

At the tail-end of last week BMO Capital Markets analyst Edward Stereck came out with some bullish comments regarding Cameco Corp.

In Stereck’s commentary for his initiated coverage of Cameco he stated the following:

Cameco’s leading role in uranium production and diversified nuclear asset base makes it well-placed to capitalize on forecast growth in the nuclear industry over the coming years and decades

He rated the stock as outperform and placed a 12 month price target of $35 per share (US). In the report Stereck also stated that the stock is expensive when compared to its peers (listing Paladin) but this premium is acceptable due to the size and market share of Cameco.

With the recent run up in share prices for Uranium stocks across the board a report such as this can only be viewed as positive (for bulls at least) for Cameco and Uranium share holders.

Say what you will about Cameco of late (many have) but at least we can say one thing with certainty, it’s been a steady stock since mid-October.

Of course long-time or even one year+ investors aren’t jumping for joy with this stock remaining relatively flat over the past four months, but in todays market a flat stock is almost a point of safety.

Which way will the market take CCJ in the coming months? The stocks volume has remained in a range of around 3 million share per day. In-fact since the beginning of 2009 Cameco has only traded 4 million shares or above two times.

To be honest, Uranium has always been a bit of a gamble play for stockholders. The spot and market prices have never fully been valued into stocks and it the sector is always ready to “break out”.

Judging by the lack of price movement and volume in Cameco shares over the past three or four months I’d wager that investors are wary about entering into any stock that has even a portion of speculation built into its movement.