Cameco Stock Soars As The Uranium Sector Blasts Off, Options Traders Pile In

Cameco Corp CCJ was skyrocketing up over 8% higher on Friday helping to pull the Global X Uranium ETF URA over 9% higher. The Saskatoon-based uranium producer is the world’s largest publicly traded uranium stock with a market cap of $9.9 billion.

The stock is trading down more than 55% from its June 2007 all-time high of $55.97 and in March 2020 it found a bottom at the $5.13 level and reversed upwards.

This September Cameco looks to be breaking up from a bull flag on the monthly chart with the pole created between November 2020 and June 2021 and the flag between June and August.

When a pattern is created on a chart using a larger time frame the break from the pattern can be larger and more powerful: A break from an hourly bull flag may last only an hour or two whereas a break from a bull flag on a monthly chart could last a month or longer.

Options traders believe Cameco is in for a major reversal to the upside and on Friday hammered dozens of bullish call contracts totaling into the millions.

On Thursday, Jon Najarian also saw unusual option activity on Cameco with traders purchasing over 12,000 contracts of call contracts with a December monthly expiry and a strike of $25.

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The CCJ Trades: Below is a look at two of the notable options alerts, courtesy of Benzinga Pro:

• At 10:23 p.m., a trader executed a call sweep at the ask of 922 Cameco options with a strike price of $22 expiring on Oct. 15. The trade represented a $216,670 bullish bet for which the trader paid $2.35 per option contract.
• At 1:14 p.m., a trader executed a call sweep at the ask of 4,650 Cameco options with a strike price of $30 expiring on Oct. 15. The trade represented a $409,200 bullish bet for which the trader paid 88 cents per option contract.

The Cameco Daily Chart: When viewed on the daily chart Cameco’s monthly bull flag appears as a bullish falling channel. The stock began trading in a downtrend within the channel on June 7, making fairly consistent lower highs and lower lows. On Aug. 24 the stock broke up bullishly from the channel and then consolidated the move for three trading days under a resistance level at $17.27 before skyrocketing over 46%.

On Friday, the stock slammed into a higher resistance level at the $24.98 mark. The stock may need to gather some energy through consolidating because its relative strength index (RSI) has become very extended. Cameco’s RSI was measuring in at about 87% which puts the stock firmly into overbought territory which is a sell signal for technical traders.

Cameco was trading up on high volume which indicates high investor interest in the stock. By mid-afternoon, approximately 16.41 million shares had changed hands compared to the average 10-day volume of just 2.14 million.

The stock is trading above the eight-day and 21-day exponential moving averages with the eight-day EMA trending above the 21-day, both of which are bullish indicators. Cameco is also trading above the 200-day simple moving average, which indicates long-term sentiment is bullish.

• Bulls want to see some much-needed consolidation to drop Cameco’s RSI and then for big bullish volume to drive the stock up over the $25 mark. If it can regain the level as support it has room to move up toward the $29.65 level.
• Bears want to see Cameco continue to reject its upper resistance and then for big bearish volume to come in and drop the stock down under the eight-day and 21-day EMAs. If Cameco loses the areas as support it could fall down toward $17.27.

Photo by Bill Jelen on Unsplash