What’s ahead for uranium stocks?

It was sell now, ask questions later for the uranium market on Monday.

Investors may have been frozen on Friday as they watched a massive earthquake and tsunami ravage northeast Japan, but the country’s nuclear emergency woke them up.

Developing events at nuclear facilities in Japan had a swift impact on uranium equities as the week began. Industry leader Cameco Corp. dropped nearly 13%, while smaller players like Denison Mines Corp. and Uranium Energy Corp. fared much worse. With spot prices declining 9.8% and the situation in Japan not getting any better, the damage may be far from done.

Major non-financial events, whether specific to companies, industries or all-inclusive, frequently bring about quick liquidation in related markets as investors move to preserve capital, noted Ross Clark of Vancouver-based Institutional Advisors.

He highlighted the BP oil spill, flooding of Cameco’s Cigar Lake mine, 9/11, Japan’s Kobe earthquake and the assassination of JPK as examples.

“Depending upon the severity, definability and enduring impact of the event, the selling can be over in as little as a day or last for months,” Mr. Clark said in a research note.

From a technical perspective, he pointed out that most selloffs result in daily or weekly downside capitulations prior to the bottom being established.

In the case of the Kobe earthquake, the Nikkei fell and the U.S. dollar rallied against the yen for two months before capitulation and basing began.

Mr. Clark expects uranium stocks to bounce off the sharp declines, only to see further waves of selling, with junior miners and explorers likely to underperform for an extended period of time.