Trade of the Day: Barrick Gold Corporation (USA) (ABX) Ripe for a Drop

Barrick Gold Corporation (USA) (NYSE:ABX) — Despite a technical breakdown Tuesday, ABX continues to be a favorite of Wall Street, including S&P’s mining analyst. Standard & Poor’s has a four-star buy on the stock with a target of $25.

Barrick Gold Corp is one of the world’s largest gold companies in terms of both production and in-the-ground reserves. Its ability to reduce costs and debt by $2 billion in 2016 and by more than $3 billion in 2015 has reduced its debt to just a few major bond maturities through 2021.

In addition, management has stated that the company is positioned to be cash-flow-positive at gold prices as low as $1,000 per ounce. S&P estimates an EPS of 75 cents in 2016 and $1 in 2017.

Yesterday, a rounding top that began in May had a breakdown that carried through ABX’s major support line at about $17.25 and in the process opened a chart gap of almost 50 cents. Further, volume was very high as prices fell rapidly as the stock sliced through its 200-day moving average at $16.12.

This stock could have a dead-cat-bounce, and traders should try to buy it for a trade if it opens lower. But the first genuine support is at the top of the gap at $13.93 made on March 23. Therefore shorting ABX as it attempts to close the gap is the best tactic now.

Try to sell ABX short at $17-plus for a fall to $14 for a possible gain of over 20%. As with all short sales, enter a stop-loss order to protect against a rally and possibly unlimited risk.

ABX Breakdown
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