3 Gold Stocks on the Verge of a Breakdown

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gold stocks - 3 Gold Stocks on the Verge of a Breakdown

Source: Jeremy Vohwinkle via Flickr (Modified)

Gold stocks remain under pressure heading into the new week. Though gold miners were able to halt their descent for a spell in recent days, the pause is looking more and more like one that refreshes … to the downside.

3 Gold Stocks on the Verge of a Breakdown

The latest victim in the golden rollover is the 200-day moving average. The exchange-traded funds SPDR Gold Trust (ETF) (NYSEARCA:GLD) and the Market Vectors Gold Miners ETF (NYSEARCA:GDX) both slipped below their respective 200-day averages and have yet to recover. Traders hoping for a quick rebound from the recent weakness better hope for a remounting of this pivotal long-term average, pronto. Otherwise, the technical picture remains dismal.

If you’re looking for a culprit for the yellow metal falling out of favor, look no further than the rapid rise out of the U.S. dollar. The correlation between gold and the buck has been deep in negative territory for the past six weeks. That means any and all strength out of the dollar has proved a stiff headwind for gold stocks.

Traders looking for further pain in the gold space should keep these three beauties at the top of their list.

Behold, three gold miners teetering on the edge.

Gold Stocks on the Verge of a Breakdown: Newmont Mining (NEM)

Gold Stocks on the Verge of a Breakdown: Newmont Mining (NEM)
Source: OptionsAnalytix

Newmont Mining Corp (NYSE:NEM) kicks off today’s list with an increasingly bearish chart. NEM stock’s recent descent has been sufficient in sacrificing some 40% of this year’s gains. While that’s far from irreparable damage, garden-variety retracements typically terminate before giving back 50% of the prior advance.

NEM better right the ship quickly or it runs the risk of throwing one heck of a wrench into its weekly uptrend.

The daily trend is officially lower, complete with descending 20-day and 50-day moving averages. Following its harrowing descent in early October, NEM shares have been consolidating near support, creating a low base setup in the process.

If Newmont Mining takes out near-term support at $33.50, look for another down-leg to take root.

Buy the Dec $35 puts for around $3.

Gold Stocks on the Verge of a Breakdown: Barrick Gold (ABX)

Next Page 3 Gold Stocks on the Verge of a Breakdown: Barrick Gold (ABX)
Source: OptionsAnalytix

Barrick Gold Corporation (USA) (NYSE:ABX) is a spittin’ image of the Gold Miners ETF.

Unlike NEM, the descent in ABX has carried shares beneath the 200-day moving average for the first time since January. Its two-week base has featured a pair of rally attempts that were swiftly rejected.

With overhead supply remaining heavy, it’s likely only a matter of time before ABX stock breaches near-term support and delivers yet another downswing.

Watch for a breach of $15.30, then grab Dec $16 puts for $1.50.

Gold Stocks on the Verge of a Breakdown: GoldCorp (GG)

Gold Stocks on the Verge of a Breakdown: GoldCorp (GG)
Source: OptionsAnalytix

GoldCorp Inc. (USA) (NYSE:GG) rounds out today’s trio with perhaps the worst looking chart of the bunch. Sellers have succeeded in sinking GG stock the furthest since sentiment for gold miners soured.

Last week’s action featured a mid-week rebound that fizzled into the weekend. Like its predecessors, overhead supply continues to weigh heavily on GoldCorp. And until that changes, the path of least resistance remains lower.

Look for a break below Friday’s low ($14.25) to confirm the descent in GG stock is continuing, then buy the Nov $16 puts for $2.

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/2016/10/gold-stocks-breakdown-gg-abx-nem/.

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