Shares of uranium mining company Uranium Energy (UEC -1.90%) snapped a two-day, pre-holiday losing streak -- and snapped back dramatically higher on Monday. Indeed, at $3.78 per share as of 1:05 p.m. ET, shares of the uranium miner are up 10.8% and are worth more than at any time in the past month.
Why are Uranium Energy shares glowing green today? As I hinted earlier this month, there's a curious dynamic going on with the uranium prices that underlies the prices of shares of uranium stocks.
Over the past few months, uranium prices have repeatedly risen and fallen, but each successive "peak" seems to be lower and lower. After passing $50 a pound in September, and falling, uranium prices only topped $48 a pound before falling again in October. In November, the peak price didn't even reach $48 before falling -- and at less than $44 a pound in December, uranium now sells for 13% less than at the top of this cycle.
And yet, while the peak prices of uranium have been getting lower and lower with each cycle, the trough prices for uranium have been getting higher and higher. In October, prices bottomed just below $38, but in November, uranium prices bounced before even hitting $42 -- and at $44-ish per pound today, it seems likely the next move in price will be higher.
With each successive high being lower than the last, and each successive low higher than the last, it kind of looks like uranium markets are oscillating back and forth as they attempt to home in on a "right" price for uranium -- a price at which supply and demand, sellers and buyers will be balanced and price swings should become less dramatic.
My best guess is that this right price will be "$46 per pound of uranium," plus or minus. The only thing we need to know now is whether that will be a high enough price to permit Uranium Energy to sell its uranium at a profit.