Every Friday on TheoTrade I go over top-down trends in the stock market and on November 27 one of those areas was uranium stocks like Cameco Corp (NYSE: CCJ). At the time, this was following the broader rally in materials stocks. However, last Wednesday I posted some of the unusual option activity on our site that was happening on CCJ. Then on Thursday, the industry got a boost from a compromise to the National Defense Authorization Act (NDAA).

According to S&P Global, the bill will begin studying the viability of mining critical minerals at sea. Those critical minerals are uranium, lithium, and graphite. The bill would classify these minerals as vital to national security. This news is timely for uranium producers amidst the rise in nuclear power production across the globe and the frenzy to produce cheap hydrogen.

Over the past year, uranium prices have stabilized and begun to rise to levels not seen since 2016. Here is a seven-year chart of uranium prices from Cameco’s website.

CCJ Option Activity

Cameco has seen several days of unusual option activity, including today. Here is a breakdown of some of the significant option activity:

• December 2—2,900 18 DEC 20 $12 calls mostly BOT @ $0.05 to $0.07
• December 4—5,000 19 MAR 21 $15 calls BOT @ $0.20; 5,000 19 MAR 21 $12 calls sold @ $0.75
• December 7—10,000 15 JAN 21 $13 calls BOT @ $0.56 to $0.57; 10,000 15 JAN 21 $15 calls sold @ $0.20

The initial activity led off the rally. The activity on December 4 rolled the strike price to a higher strike price. Then, the activity today involves rolling a December long into a long call vertical for January. The strike selection of today’s vertical is reflecting a potential target in the next 39 days of $15.

CCJ Technicals

At the time of this writing, the price of CCJ is testing a new 52-week high on substantial volume. While the price is fairly extended in the near term, the frenzy may just be getting started. As you start to look at a longer-term perspective, we may just be reversing a long downtrend from $45 in 2011.

A close above $13.36 would complete a long-term reversal pattern on CCJ. Given the $6 range during this bottoming phase, the target would be Near $19. That level also happens to be near the 61.8% retracement level of the 2014 to 2016 downtrend.

Conclusion

While the near-term projection for CCJ from the options activity is a target of $15, the longer-term price activity is looking at $18.50 or higher. The potential of this industry may be significant as uranium prices reverse their long-term downtrend and production and demand increase.