Lachlan McPherson provides up-to-date market analysis: What next for uranium stocks?

Since early 2011, when oil prices began to climb above $US100 a barrel, uranium stocks have also begun to climb higher as nuclear energy has become a more viable alternative. Floods in Queensland, with subsequent disruption of the transport infrastructure, caused coal prices to soar. At the same time, the world’s largest oil suppliers in the Middle East were threatened by political instability and the spectre of war loomed, adding further pressure to the oil price.

And then it happened.

A force 9.0 earthquake struck Japan, dangerously close to one of Asia’s largest nuclear reactors. The Fukushima nuclear plant was on the verge of meltdown. As this issue of YTE goes to print, the nuclear plant is still not under control. Water contaminated by radioactivity is harming marine life, and the effects, both environmental and economic, are not yet known. Global media will take the story, squeeze as much mileage from it as possible (and spark a sell-off in stocks associated with the nuclear industry) similarly to the way BP’s oil disaster off the coast of Florida was reported in 2010.

Since the peak of the BP oil disaster, BP has experienced nearly 60 per cent growth in its share price. The negative press has slowed to a trickle and oil, once the devil of the energy sector, is back in favour. Possibly the Fukushima nuclear disaster will cause just a fraction of the environmental and economic damage caused by the BP oil spill. The market is simply waiting for the next big event to turn attention away from uranium and its sell-off...

Excerpted from an article originally published in the May/Jun 2011 issue of YourTradingEdge magazine. All rights reserved. © Copyright 2011, Your Media Edge Pty Ltd.
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