For most of the last three years, uranium producer Cameco Corp. (CCO.TO) has been a relative outperformer among Canadian large caps, spending much of the past year in the Green Favored Zone of the SIA S&P/TSX 60 Index Report. However, in the winter of 2024, the shares briefly fell into the Red Zone during a correction. CCO.TO then surged back to the top of the Green Favored Zone in April and maintained that position for most of the summer. Yet, the stock has recently begun to underperform the market, creating volatility for SIA relative strength practitioners. As the saying goes, "Where there's smoke, there's fire." Today, Kazatomprom, the worldâs leading uranium producer, is scaling back its production forecast for next year due to persistent supply chain disruptions and construction delays. With global uranium prices soaringâdriven by tight supply and increasing demand for nuclear energyâthe company's size and market influence highlight the significant impact of these operational challenges on the broader industry. Having experienced a significant rally from the breakout last summer (May 2023) at $43.42 to current levels, it is not surprising that CCO.TO shares are taking a breather. However, it would be prudent to monitor this intermediate-to-long-term outperformer for a potential return to long-term leadership. Currently, the shares are positioned for a consolidation trade, with support around $55 and resistance at $75. A breakout beyond this resistance could confirm that the uptrend has resumed, especially if our main coach, Relative Strength, is reestablished within the SIA S&P/TSX 60 Index Report.
As of this report, shares are up about 6% due to industry news, trading at $58.29. Initial support appears at the recent low near $51.89, followed closely by $48.90, with long-term support at the prior breakout level of $42.57 appearing robust. Resistance levels, based on horizontal and vertical counts, suggest potential upside tests near $77.10 (current top of the zone), $88.60, or $92.15. With a still bearish SMAX score (a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 2 out of 10, CCO.TO is showing short-term weakness still against its peers. We recommend revisiting the chart after the SIA Update this weekend and monitoring improvements in Cameco's position once markets volumes return from their summer doldrums.
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