Barrick Gold Corporation’s (USA) (NYSE:ABX) latest earnings announcement juiced the stock 5% and aided in its ongoing recovery attempts. The popular gold mining stock has been carving out a classic bottoming pattern that reflects the long-awaited return of buyers to a forsaken sector.
The price chart of ABX stock boasts a trio of compelling developments that the bulls should find attractive.
First, we have the formation of an inverted head-and-shoulders pattern. This bottoming pattern arises when a higher pivot low develops in a downtrend reflecting a structural shift in the trend.
The normal downtrending pattern of lower pivot highs and lower pivot lows is interrupted as anxious buyers step in to halt the stock’s decline before reaching a prior support zone. This increased aggression by dip buyers is a positive omen, often signaling the beginning stages of a new uptrend.
The bullish price action in ABX over the past month has been accompanied by multiple high volume up days, suggesting institutions are accumulating shares. This should bode well for the stock going forward.
A final dynamic worth mentioning is the clear overhead resistance level sitting at the $13.30 zone for ABX stock. This level is acting as the neckline for the aforementioned head-and-shoulders pattern and is a perfect spot to use for a breakout.
Traders looking to capitalize on the next stage of ABX’s trend reversal should use a break above this neckline as a trigger for their trade.
Double Your Money with ABX Call Spreads
Consider buying the Apr $12/$14 call spread for $1 or better to play its continued trend reversal. The max risk is limited to the initial $1 debit and will be lost if ABX falls below $12 by April expiration.
The max reward is limited to the distance between strikes minus the $1 debit, or $1, and will be captured if ABX can rise above $14.
By risking $1 to make $1, the spread allows you to double your money should ABX rise another 7% or so over the next two months.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
