SMR (NuScale Power Corp.) is plunging more than 10% today as investors react to the broader market selloff.
Friday’s selling was deeply rooted in the fact that yields on the Ten-Year Treasuries jumped back to their recent high. The spike in rates suggests that the bond market is preparing for a higher probability of inflation in 2025.
Just weeks ago, the Fed lowered interest rates for the final time in 2024. That adjustment was accompanied by Jerome Powell’s comments that suggest the Fed is becoming more sensitive to inflation concerns in 2025.
Higher rates and inflation are what derailed the stock market in 2022. That memory serves fresh in investors’ minds today with the markets trading at all-time highs.
SMR stock is potentially positioned better than most small cap companies for the fight with inflation.
Shares of the company have surged as nuclear power – especially small modular reactors – have become a potential solution to the growing need for energy due to AI’s expansion.
SMR has been positioned as a leader in modular nuclear reactor technology. Notably scalable, low-carbon energy solutions.
Today’s move is more likely the result of investors trying to lock in profits after 3-month returns of more than 50%.
However, the recent drop will be met with a surge in buying as many investors have missed SMR as an early investment.
NuScale shares almost traded at their lowest price since November as they hovered over $17.50 just a week ago. This price should be considered a stronghold for the stock, though there is a technical barrier that needs to be overcome.
This week’s trading saw SMR trade to the confluence of its 20- and 50-day moving averages at $22.50.
The stock’s 50-day moving average is currently in a bullish trend, suggesting that prices should be higher over the next 4-6 weeks.
Conversely, NuScale’s 20-day moving average – also referred to as the “Trader’s Trendline” – is trending lower.
Shares will need to break above this technical “hurdle” early in January to continue the stock’s bullish trajectory.
The bottom line is that NuScale shares – while in a bull market – are likely to see one more drop to $17.50 followed by a surge of buying.
A move back above $22.50 at that point will trigger a new “fear of missing out” rally that should take SMR shares back to their highs above $30.
NuScale Energy shares are considered to have a bullish outlook with a price target of $50.00.
