With the Dow Jones Industrial Average 20,000 obsession flooding the Street, many traders have missed the quiet recovery in gold prices. Since bottoming just before Christmas at $1,124, the yellow metal has climbed a respectable 6.3% to its current perch around $1,195. Naturally, gold stocks are joining in the ascension with a comeback of their own.
Credit for the rebound lies in large part with the U.S. dollar, which has spent the past month falling from its lofty heights. Whether the currency’s weakness is a ruse or the beginning of a larger unraveling remains to be seen. For now, precious metal lovers are capitalizing on its downturn by returning en masse to gold stocks across the board.
For a quick glance at the entire industry, look no further than the Market Vectors Gold Miners ETF (NYSEARCA:GDX). Over the past month, the gold stock fund succeeded in reclaiming the high ground. The budding ascent has carried shares back above the 50-day moving average and pivotal short-term resistance.
Today’s trio is mimicking the bullish action with quality setups of their own.
Gold Stocks to Mine for Profits: Silver Wheaton Corp. (SLW)
We begin with a fan favorite, Silver Wheaton Corp. (USA) (NYSE:SLW). Since bottoming with gold prices in mid-December, SLW stock has climbed 26%. The turnabout has been sufficient in reversing both the 20-day and 50-day moving averages higher. Last week’s three-day pullback was bought with aggression creating a solid bullish engulfing candlestick during Friday’s trading session.
Look for continued strength to carry SLW to its 200-day moving average looming overhead at $22.68. Option premiums are cheap suggesting a long call play is the way to go. Buy the Apr $21 call option for around $1.90.
Gold Stocks to Mine for Profits: Agnico Eagle Mines (AEM)
In true sector sympathy, Agnico Eagle Mines Ltd (USA) (NYSE:AEM) is following in the footsteps of its predecessor. In fact, its price chart looks virtually identical to SLW.
Rather than rehashing the technicals, let’s use AEM to identify when you should modify your bullish outlook. If the budding recovery in gold stocks is the real deal, then we don’t want to see a deep enough drop to carry shares back below their 50-day moving averages. For AEM stock, we’re talking the $42.25 price level.
If you buy the suggested call option considering using a break of that level as your stop loss.
Buy the AEM May $45 call option for $4.80.
Gold Stocks to Mine for Profits: Goldcorp (GG)
Goldcorp Inc. (USA) (NYSE:GG) rounds out today’s selections with a robust recovery of its own. Since bottoming in mid-December, GG stock has climbed an impressive 32%. Unlike its predecessors, Goldcorp’s rally was sufficient in breaking the descending trendline that defined its slide during the back half of 2016.
Last week’s pullback was shallow, proving that dip buyers are still alive and well. If you think the good times continue to roll for gold stocks, grab the Apr $15 call for $1.55.
At the time of this writing, Tyler Craig didn’t own any positions in the aforementioned securities.