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In early afternoon trades on Friday, four uranium stock were the top fallers for the day in terms of share price. They were:
- Paladin Energy (ASX:PDN) – down -7.6% ($5.92)
- Deep Yellow (ASX:DYL) – down -6.2% ($1.24)
- Boss Energy (ASX:BOE) – down -5.5% ($3.79)
- Bannerman Energy (ASX:BMN) – down -5.2% ($2.76)
And one might be quick to assume, well, surely the price of uranium has dipped overnight. Right?
Except that it hasn’t. In fact, uranium prices are up +10% over the last month.
Check out the 1Y price action expressed as a line chart:
So why were four of the best-known uranium stocks dropping on Friday?
Highly correlated stocks
We were just discussing line charts before when it comes to uranium, but it’s worth also assessing what the companies charts together look like.
One immediately notices a pattern. Check it out:
So, that’s the first thing to note – when these stocks move, they tend to move in tandem. More or less. All companies except for Bannerman have market caps over $1B.
But that doesn’t explain why prices were falling on Friday.
We’re probably seeing profit taking
In my view, the reason four uranium stocks were the top fallers on Friday even as uranium prices increased wasn’t due to anything but good old trader psychology: people profit taking on a Friday.
That implies investors see further upside for the stocks, and should uranium commodity prices continue to rise, that theory could very well be true.
(Conversely, some sellers today may have a more bearish outlook, and so withdrew money expecting shares to decline.)
At any rate, profit taking appears to be the key suspect.
Why profit take now?
And what’s driving that? Well, a world that seems less intense than it did a few weeks ago.
Trump has inked a trade deal with the UK; he’s paused the high tariffs on China for 90 days and both countries appear to be moving to tariff brackets of still-dramatic-but-far-less-so ranges like 30%-40%.
The softened stance on China led to beliefs a basket of commodities would be in high demand again, given China’s nature of the world’s hungriest economy.
Then there were recent deals made in the Middle East by Trump which have included fresh discussions with Iran around its nuclear program.
One must also consider that Canada and Kazakhstan are major uranium producers; in the current environment, it’s looking like countries could end up with lower tariffs than first declared on April 2.
Regardless of where you see the next six months going, add all of that together, and it’s a sensible time to take profits.
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