Gold and gold stocks are profiting from the ongoing market turmoil. While gold companies have yet to score a rousing return to bull territory, their unwillingness to go lower is admirable. Each and every time the Market Vectors Gold Miners ETF (GDX) has tried to break down anew, a rush of buyers has stepped in to stem the decline.
Last week’s drop was no exception. GDX submerged below pivotal support at $13 on heavy volume, beckoning to bears one and all to short gold stocks with prejudice.
And then the trap sprung.
GDX snapped back viciously and has since rallied some 11%. With an exclamation point added to the ongoing bottoming process in gold stocks, now is as good a time as ever to consider snatching up a few of the top performers in the gold mine.
Here are three gold stocks catching fire.
Gold Stocks Catching Fire: Barrick Gold Corporation (USA) (ABX)
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Topping our list is Barrick Gold (ABX) which is arguably the best-looking of the bunch.
Amid this week’s gold rush, ABX stock soared as much as 35%. Not bad for a beaten-down, left-for-dead stock. With the surge, ABX was able to rally above its descending 200-day moving average for the first time since August 2014.
We technicians like to call that progress.
Further buttressing the bull case for Barrick Gold is the groundswell in volume accompanying the breakout. Some big boys wanted into ABX and they weren’t afraid to pay up for it. Accumulation days add legitimacy to the breakout and increase the likelihood it actually sticks.
In the short run ABX is running hot (overbought) so watch for a pullback of some consolidation in the coming days to provide a lower risk entry.
Buy the April 9 call option.
Gold Stocks Catching Fire: Newmont Mining Corp (NEM)
Our second gold stock beauty is Newmont Mining (NEM). While its bottoming process isn’t as far along as ABX, it’s attractive nonetheless. For the past six months, NEM stock has been building a base that the bulls hope will serve as a launching pad if the gold stock turnaround can go the distance.
The recent flurry of buying has sent shares of Newmont from the lower end to the upper end of their trading range in one fell swoop.
Now the true test begins.
Watch for NEM stock to break above the $20 resistance zone, which just so happens to coincide with the declining 200-day moving average, in the days ahead. A successful breach of this level is as logical an entry as you’ll see on NEM.
Buy the April 19 call option.
Gold Stocks Catching Fire: Randgold Resources Ltd. (ADR) (GOLD)
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Rounding out our trio is Randgold Resources (GOLD). Like its golden brethren, GOLD has been locked in a vicious bear market. And, fortunately for gold stock lovers, GOLD is exhibiting the same bottoming characteristics as Barrick Gold and Newmont Mining.
The bottoming action in GOLD has been the sloppiest of the three, but its posture has improved notably this month. The bullish high-volume thrust has lifted Randgold above its 200-day moving average returning the stock to pivotal resistance near $70.
Watch for another low-risk setup to materialize in the coming days. A pullback would be a welcome development, or simply some consolidation to digest the overbought conditions.
Either way, look to buy GOLD calls following the profit taking.
Buy the June 70 call option.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
