3 Gold Stocks to Buy for the Rebound

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The buying frenzy this week gave beleaguered bulls a much needed reprieve. And nowhere were its healing powers more welcome than the commodities space. Gold prices received a mild boost, but the big winners were gold mining stocks.

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Source: ©iStock.com/jojoo64

The Market Vectors Gold Miners ETF (GDX) is up 17% in the past five days alone.

If you’re skeptical of any and all strength emerging from gold stocks, I don’t blame you. The cyclical bear market that has dominated gold stocks has long since extinguished the hope of many shareholders. And yet, the multi-year downtrend has been punctuated by the periodic upturn that has delivered profits aplenty to tactical bulls.

I suspect we have another such surge on our hands now. Besides, given the depths of GDX’s descent in recent months it can rally considerably from here before any major overhead resistance comes into play.

Consider snatching up long calls on these three gold stocks.

3 Gold Stocks to Buy: Barrick Gold

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Source: OptionsAnalytix

The descent in Barrick Gold (ABX) has been slowing for weeks. Though the price has made a series of lower price lows, the popular RSI indicator has been carving out a series of higher pivot lows, creating what we chartists like to call a bullish divergence.

Such a signal suggests the bears are losing their grip and the downtrend is ripe for reversal.

This week’s gold stock surge was obviously the long-awaited resolution of the divergence. Now we will see if the bulls will press their advantage. So far, things look solid. One of the positive technical signs shared by ABX stock — indeed, all three of today’s gold stocks — is the return back above the 50-day moving average.

Buy the ABX Dec $7 calls.

3 Gold Stocks to Buy: Silver Wheaton

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Source: OptionsAnalytix

Silver Wheaton (SLW) is perhaps the strongest gold stock of the bunch. This week’s rally has lifted SLW shares some 25% higher. Not bad for three days of work, eh?

Not surprisingly, the rip-roaring rally has been accompanied by heavy volume, adding credibility to the breakout and increasing the odds that the new uptrend will stick. The ascent has been adequate in carrying SLW stock above both the 20-day and 50-day moving averages.

Don’t be surprised if a bout of profit-taking ushers in a pullback over the coming days. Such a dip should be viewed as a buying opportunity.

Buy the SLW December $13 calls.

3 Gold Stocks to Buy: Newmont Mining

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Source: OptionsAnalytix

The bottoming action in Newmont Mining (NEM) began months ago. This week served as the catalyst to finally spur a breakout and the completion of its trading range.

The surge in gold stocks was sufficient to lift NEM stock back above its 50-day moving average for the first time since May. While all previous forays above the 50-day have ultimately ended in failure, many were good for sharp counter-trend rallies before sellers finally took control.

I suspect this one maybe similar. Similar to its brethren gold stocks, NEM stock saw elevated volume during its surge, increasing the likelihood that the next dip gets bought as fresh buyers defend their newfound foothold.

Buy the NEM December $17 calls.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/gold-stocks-abx-nem/.

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