Sometimes buying the right stocks is the easy part. What can be even harder is deciding when to sell them. Sell too soon and you think about all the profits you could have had. Sell too late and you fixate on all the profits you used to have. We did some swing trading in uranium stocks a few times in the last year. This latest strong move, we decided to take our profits quickly.
Participating In Uranium Stocks With An ETF
One of the instruments we often use to benefit from moves in uranium is through an ETF like Sprott Uranium Miners. It not only holds uranium miners like Cameco but also the Sprott Physical Uranium Trust (which trades in Canada). Those are two of the largest positions, but it has a combination of other uranium miners that trade both domestically and on foreign exchanges.
The uranium stocks formed a nice cup-with-handle pattern starting in September. This was after a solid run-up from August through September while the general market was correcting.
After the Nov. 1 follow-through day, uranium stocks had a brief move and then started forming a flat base (1). One of the characteristics of a flat base is that it doesn't correct much. In the case of URNM, it didn't fall more than 9% from its all-time high for the entire six weeks of the base.
Tight action is a characteristic of winning swing trades and as URNM popped back to highs, we added it on SwingTrader (2).
How Long Can A Strong Move Last?
The move in uranium stocks over the next few days was phenomenal. We took our initial third position off once we hit our 2.5% profit the next day (3). Then a couple of days later the stock popped up over 8% putting us well over a 10% profit (4).
It's hard not to get greedy when that happens. You start imagining what another move like that could do to your portfolio and it's hard not to salivate. But just looking at URNM, it was more than 14% above its short-term 10-day moving average line. Even a pullback to that line would wipe away a lot of profits. And it's not like URNM hadn't gone even further before. Back in September 2021, it was more than 20% extended above its 10-day line. After hitting that level, URNM corrected 25% in just a week's time!
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Rather than being greedy for future profits we were protective of the profits we had. We debated exiting the entire position but ended up trimming by another third.
After deciding to hold the remaining third position a little longer, we committed to look out for reversals. The next day, URNM shot up over 2.5% then started losing steam (5). That was enough for us. We exited our uranium stocks position with over a 12% profit on our remaining shares and ended up 9% for the trade in a week.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
