Critical juncture in trading pattern - a test happening, will we succeed?.
From a weekly perspective, AEE moved from 17.5 to 16. Usual volume. AEE is a hot and cold stock, some big brokers do the run. If it looks good, they take it higher than average, if weak, they push below the average. Hence it ahd a swing between 15.5 and 18.5 just this week.
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So what is happening? Last week CCJ had confirmed one thing which I had been asking - will it cross 56.24 first to make a new high or back test 45? It made a new high. This week on Monday, it made a slightly higher high, but that was not good enough. CCJ is on a very weak play this weak and looking vulnerable. It has now had 4 reds in a row this week. Very rarely it does that. So a caution time for those playing short-term.
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What may give direction? I feel, that CCJ should not drop more than 10% from its high. I wrote the same last week. CCJ is playing weak for now. Yesterday it reached 53.18, very close. The 10% drop is 52.80. If it goes below 52 tonight or shortly, then for any short term play I may have a think. Last time in July when it dropped more than 10% from its high, it lost the plot and from 56, after coming to 50, wavered for few weeks just over 50 and then had a big drop towards 35. The sector is volatile, whether we like it or not. In end of July/early August a lot of U stocks crashed to over 50% loss, even in this great U bull macro situation. Yes, big stock lost billions. Fundamental didn't change that much. So there is something else which goes on in U sector. Whether we like it or not it happens. It can make big gains - we all think its valid because U macro is so strong. And then it falls 50%. Why? We are lost. The sector is played. Whether we like it or not, we should be open to the idea and be prepared for that. Especially those who don't have much longer timeframes in mind.
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So I feel we are again at one of those moments. Will CCJ hold 52/53 and we see a good rise in most U stocks, or it loses that, and it loses further, and most U stocks panic and lose big in short term? We don't know. Its better not to assume what will happen. But play to price action.
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Personally for last 2 weeks I have been writing that I was getting out of Li sector. After watching the play early in this week, I felt I have to be in it. But I still haven't got a very strong signal, but a good signal. Also, the other sector where I play big, the Uranium sector, is in consolidation mode. That too is in flux which way it will go. This week Uranium sector played slightly weak, had a big gain recently, so looks to be in consolidation mode. So the sector play that I do, I am now two-thirds Uranium, one-third Lithium. I picked up a fair few Lithium stocks this week and let some U stocks go. Rest playing health, ree, gold etc.
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.Personally, last week I wrote that for this phase I had done fresh buys, my average just over 16. No trades for me this week. I am still there.
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So what may happen next week? I have a feeling that CCJ will give direction. If it holds 52/53 - the uptrend may continue. If CCJ loses that, it does not mean the uptrend is stopped, but odds decrease. There are no guarantees. So I feel that after 4 reds in a row, and close to 10% drop from its high, CC has a task cut out for tonight. Which way will it go? We don't know. We can only hope. That its on the up. Will that happen? Lets hope so. Enjoy your weekend and all the best
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