A few weeks ago, as gold was making new all-time highs, I warned investors that it was not the opportune time to invest in gold stocks. I foresaw a correction, and I was right.
Gold sold off last week, in part due to better-than-expected unemployment data and the Fed saying it believed inflation will remain “subdued.” And gold stocks followed the metal down.
Now, don’t get me wrong. I am BULLISH on gold in the long term (and I think it’s almost time to go long gold stocks again). But I didn’t think you’d want to weather the pullback I saw coming.
That said, there was one gold stock that actually closed up on the week: Northern Dynasty Minerals Ltd. (NAK).
There’s something to be said for a stock that hangs tough in a market as volatile as the gold sector and even outperforms the actual metal!
So while gold might see some more consolidation in the short term, NAK should hold up just fine.
In fact, it should do a lot more than just hold up, as it’s about to break out of a bullish ascending triangle pattern.
Keep in mind that with ascending triangles it’s not a breakout until we actually close above the breakout line, which, in NAK’s case, is $9 (marked by the 3 in the chart).
However, with this stock I think it’s prudent to build a position prior to the breakout. And the best way to play it is with call options. I’d take a look at the May NAK calls, as there are some great bargains to be found.
Gold is headed back up eventually, but in the meantime, NAK should bag you some nice profits in the sector.
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