With the global push toward net zero emissions, one out-of-favor sector is making a comeback.

The Global X Uranium ETF (URA) invests in uranium miners and manufacturers of nuclear components. And it has rallied strongly.

After a false breakout at the start of this year, URA rose 55% in just six months.

But that strong buying momentum pushed URA into overbought territory. And it pulled back sharply from its late-September high.

So now let’s check if URA is setting itself for another run higher…

Momentum Dried Up

The chart below shows URA’s false rally at the start of this year.

URA climbed strongly through the end of January. But it reversed just as quickly when buying momentum disappeared.

That pullback saw URA trading back around its July lows from last year:

Global X Uranium ETF (URA)

Source: e-Signal

Yet buying momentum gradually returned. The relative strength index (RSI) steadily climbed out of oversold territory (lower gray dashed line).

And URA was able to find a base.

URA bottomed out in mid-March. But the 10-day moving average (MA, red line) took its time before crossing above the 50-day MA (blue line).

In a stronger rally, this MA crossover could take as little as a week – not almost two months.

After rising to a fresh peak in June, URA retraced again. Yet this is where URA set itself up for the next leg of its rally.

The RSI briefly dipped lower. But then it broke back into its upper range. It tested and held support multiple times (red circle).

This coincided with the 10-day MA and 50-day MA tracking closely together.

URA then accelerated as the 10-day MA broke up past the 50-day MA.

Take another look:

Global X Uranium ETF (URA)

Source: e-Signal

That move’s strength put URA into overbought territory again.

This time, URA reversed sharply with a common reversal pattern.The RSI made lower highs out of overbought territory right as URA was making higher highs (orange lines).

This declining momentum pulled URA lower.

The RSI slipped lower again. And it is now testing support like it did from July through August.

So what am I looking for next?

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An Accelerating Trend?

So far, the RSI has held support. Yet it needs to remain in its upper band for URA to resume climbing.

The longer it stays in this range, the stronger URA’s rally could be. But watch out for reversals if the RSI starts tracking in overbought territory.

Also, pay attention to the two MAs.

The 50-day MA has been trending higher since May. And URA bounced off it numerous times.

If the 10-day MA accelerates above the 50-day MA again – and if both keep tracking higher – that will prove URA’s uptrend is intact.

The next test would be for URA to take out its September 28 high.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict

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