First UraniumCorp. living off the charity of the Fed

Nov 5th, 2010 – Comment

At this point it would be prudent to let this one catch a breather before chasing the opportunity. One up day does not a trend make.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou:

Could you please provide your expert comments on First Uranium Inc. (FIU).

This stock was trading around $7 at one point of time and now is trading around $0.75.

If you can do it, I think lot of people would be looking for it.

Thanks & Happy Capitalism

Dharam

Hi Dharam,

First Uranium Corp. ( FIU TSX) has been battered and torn as it sold off aggressively from the highs of $12.00 in 2007. It caught a bounce on the  second round of quantitative easing  by the Federal Reserve that will spray cash across the landscape to the tune of $600 billion through June of 2011. In general commodity stocks benefited from the Fed action but the question you have to ask  is if the lift is sustainable for FIU?  

Three year chart paints a bleak picture for the stock. The long decline from the May 2009 highs near $9.00 has been  relentless. Every effort to break above the 50 day moving average has been met with stiff resistance.

The six month chart provides a clear illustration of the resistance along the 50 day moving average and the huge bounce FIU took the day after the Fed’s QEII announcement on November 3, 2010. Here’s the rub, nothing has substantially changed at the company.

All of the lift came from external sources. If you look at the last candlestick the stock closed down from the session highs as it approached resistance at $0.95. That tells me that  investors were happy to grab a one day gain  of over 21%  but were not committing cash to a longer term opportunity.  I have to wonder how often investors can expect the Federal Reserve to provide a lift to their upside down investments?

At this point it would be prudent to let this one catch a breather before chasing the opportunity. One up day does not a trend make.

Happy Capitalism!

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