What’s Gone Up, Won’t Come Down Yet

Nuclear Energy

About 10% of the global electricity supply comes from a clean, renewable energy source that is the safest form of fuel compared to its rivals in coal, natural gas, oil, solar panels, and even wind power. Yet, the source has been shunned for two reasons linked to sheer misinformation. Nuclear energy has the lowest rate of lethality per kilowatt, and it’s not even close. Yet, nuclear energy is constantly linked to atomic weapons… or the three accidents of the last 35 years in Fukushima, Three Mile Island, and Chernobyl. Yet, comparatively, nuclear has been safer for humanity than its rivals. 

Anyone who thinks that violent particle collisions of nuclear weapons are similar to the energy source generated by the decay of nuclear fuel doesn’t understand physics… and likely doesn’t want to understand. (Shout out to my AP Physics teacher for that line). Look, I get it. Nuclear energy is confusing, confounding, and challenging. But it’s necessary. 

Governments are finally waking up to the challenges they’ve signed up for in the Paris Climate Agreement. As a result, economies around the globe need to steer away from traditional carbon-based energy sources. Anyone who thinks that solar power and wind power will meet the emissions cuts required in the next decade is fooling themselves. And anyone who thinks the status quo around oil and gas is sustainable is doing the same. Nuclear power will be a staple of the 21st century. But this might be your last chance to take advantage before a bull run.

How to Play a Surge in Nuclear Energy

Uranium prices have remained subdued since 2014. Optimism around nuclear power plunged in the wake of the Fukushima Power Plant disaster created by a tsunami and earthquake in 2011. 

In the post-COVID-19 arena, however, nuclear power is getting more attention. With natural gas and coal prices rising, nuclear fuel has looked comparatively cheap. As a result, certain institutions are taking advantage. Over the last month, uranium prices surged thanks to rampant speculation from commodity investment giant Sprott Management. The asset manager recently launched a special fund dedicated to investing in uranium spot prices. This has sent off a frenzy of buying. Sprott has purchased more than 24 million pounds of uranium and sent off a flurry of speculation.

Members of Surge Point Trader have already enjoyed a 125% jump in an options trade and a double-digit return on Cameco Corporation (NYSE:CCJ). Now, WallStreetBets is paying attention, and authors at Barron’s have caught wind, spot prices of uranium could easily surge to levels we haven’t seen before. So, it’s your last chance to get on this bandwagon.

What is happening in this space sort of resembles a short squeeze. But it’s not the traditional experience where a hedge fund is shorting a stock, and they must buy back shares to avoid losing money if prices rise. It’s a bit different. You see, utility companies that produce electricity with nuclear fuel have enjoyed low prices over the last five years. So they haven’t been buying up uranium because they believe that prices will remain low – and possibly go lower. 

So – they are – in essence – short the commodity (at least in sentiment). If they were bullish on prices, they would have used the recent price weakness to build inventory for future use. Now, with prices rising higher, they are likely going to buy sooner than later. The result of this is a run on the commodity – and that looks possible. 

We could see uranium prices rise from $40 per pound to as high as $55 in the weeks ahead. If you’re going to speculate on uranium prices, remember that trailing stops will be your friend. I’ll discuss this more all week. It’s a great time to be playing this long-term trend with a focus on short-term trading.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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