After a bullish run to start the year, we’re starting to see some profit-taking in the precious metals and mining industry. The Federal Open Market Committee recently expressed internal conflict regarding the appropriate course action for monetary policy and will likely remain dovish as it has demonstrated in the past.
While we are unlikely to see any interest-rate adjustments that could have an impact on the presidential election cycle, Federal Reserve Board Chair Janet Yellen has signaled that she is interested in raising rates and that the recent string of positive economic data would justify taking action.
But we’ve heard this on several occasions before, and the hype is beginning to fall on deaf ears.
To help shed some additional light on how investors are reacting in the gold market, let’s look at some of the top players in the space to see what the charts are saying about the direction of the price of gold and gold stocks.
Gold Stocks to Watch: Barrick Gold Corporation (ABX)
Investors in ABX have seen hefty profits come their way over the past five months or so, but there are signs that perhaps this rally is overdue for some kind of price correction.
In the chart, Profit Scanner powered by Recognia shows us several bearish events that have taken place since the beginning of July. The first bearish event, Know Sure Thing, took place on July 1 at the closing price of $22.21, warning investors that momentum was shifting away from the bulls and toward the bears.
Since then, ABX stock has tried to stay afloat, but at some point, investors will have to decide to stand firm or step aside and let it sink.
Now that ABX has also pierced the 50-day moving average, investors should be prepared for the possibility of lower price lows that could send shares spiraling down to $7.59 where major support can be found.
If this intermediate-term outlook materializes, we could see net gains of up to 62.22% for those who bet with the contrarian bears.
Gold Stocks to Watch: Goldcorp Inc. (GG)
Click to Enlarge Goldcorp Inc. (USA) (NYSE:GG) is a gold-producer engaged in the operation, exploration, development and acquisition of precious metal properties throughout North America and Central and South America.
In the adjacent chart, you’ll notice that the event markers for GG do not give a clear indication as to what might happen with GG stock going forward. Instead, Profit Scanner has provided signals that are more in line with a stock that’s consolidating, trading in a sideways tightening range as a result. But at some point in the near future, the price will break in a more definitive direction.
The most recent bearish event (price crossing below the 50-day moving average) to the far right on the chart should be taken with some degree of caution based on the historical relationship shown here between price and its 50-day MA.
On more than one occasion, we’ve seen price push through these moving averages only to immediately turn around and head in a different direction. These head-fakes are not uncommon, but they do tend to gravitate toward certain companies in particular.
So while the situation looks somewhat similar to ABX above, it’s best to wait for the price to confirm direction first (outside of the consolidation) before putting on a long or short trade.
Gold Stocks to Watch: Newmont Mining (NEM)
Click to Enlarge Newmont Mining Corp (NYSE:NEM) is a global mining company focused on the production of and exploration for gold and copper. The company focuses primarily on the production of gold, with operations and assets in the United States, Australia, Peru, Indonesia, Ghana and Suriname.
In the chart below, there is no doubt regarding the current trajectory of NEM. It’s in a 45-degree upswing and firmly sitting above its 50-day moving average. Since February, we’ve seen the 50-day moving average tested three times, acting as reliable support.
Although NEM is pulling back some, it likely has more to do with late July’s price extension beyond the 50-day moving average. Whenever the proverbial pendulum swings too far in either direction, there will be countering forces that pull the stock price back to its moving averages.
Profit Scanner tells us that overhead resistance can be found at $45.10, so that price will need to be successfully challenged soon if the uptrend is to resume. Based on declining volume over the past six months and weakness seen in other plays within the industry, it’s important to be prepared should investors eventually sour on shares of NEM too. But it all depends on what price will do as it approaches the 50-day moving average.
If the stock finds support in the low $40s, you can expect a retest of recent highs. On the other hand, if price makes a strong initial move lower, there won’t be a lot of support to help limit further declines until shares of NEM trade down into the $17-$20 range.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.