We observe cycle death on a regular basis. It often presages a rebirth. But precious few traders have the stomach for it.
Presently, cycle death has occurred in Fission, Denison, Deep Yellow, NexGen and GoviEx. The cycle, interestingly, remains intact for Forsys Metals. We have an idea why Forsys hasn’t uncoupled from its long-standing cycle, but that’s for another day.
What is cycle death?
It is the point at which price becomes unhinged absolutely from previously established long-term cycle patterns. All of the above-mentioned names shared an almost identical cycle length of XX Weeks (The Basis of Our Approach: An Edge on the Margins).
Cycle death struck Fission at its peak in January ’18 but did not become evident until approximately 12 months later. GoviEx uncoupled from its cycle in April of this year. Denison and Deep Yellow decayed out of the cycle following their respective September ’18 peaks and NexGen has decayed out since November ’18.
Why does cycle death happen?
Cycle death is a process — sometimes a long one — caused by capitulation. Structurally, cycle death and price decay are important for the health of any subsequent recovery. Complacent shorts also are known to add during low-volatility cycle death, which leads to ferocious short covering during the early stages of a recovery.
When does cycle re-birth occur?
We like to see pivot compression, low volatility, flattening price curves, and extrapolated price indicators turn upward before we feel confident calling a recovery.
We like cycle death. It’s one of the more reliable indications of true bottoming, which hasn’t been evident until recently in uranium stocks. It is also the point at which we like to add most aggressively.
I’ve been vocal about the dim prospects for uranium stocks and have on several occasions been adamant about lower prices for longer. But, I’m happy to report that I don’t think prices will remain lower for too much longer, as we’re getting the structural prerequisites ticked off for a rally.