A bull market was born in gold prices last quarter, and it continues to shine brightly. And gold stocks are being bid up alongside the commodity, bringing new opportunities to traders. Today we’ll identify a few of the best looking candidates to consider.
Since carving out a low at $1,167 last year, gold has surged $135 or 11.5%. Along the way, the yellow metal climbed back above its 200-day, 50-day and 20-day moving averages to fully reverse its short-term and intermediate-term trends. One of the most obvious catalysts for the strength was the dreadful descent in risk assets like stocks.
Scared investors have a history of hiding in the gold mine.
Perhaps the most bullish development to speak of is how well gold has stayed up during the recent market recovery. Although the S&P 500 has rallied some 12.5% off its lows, gold hasn’t budged an inch. In fact, it’s lifting to a new six-month high as I type.
Against this backdrop, many gold stocks are once again finding their luster. Here are three of the best gold stocks out there.
Vaneck Vectors Gold Miners ETF (GDX)
Click to Enlarge
Traders seeking exposure to gold stocks have two choices: Pick individual companies or buy the whole industry via an exchange-traded fund. The former route is riskier but offers more potential reward if you can identify a company that delivers industry-beating returns. For those unwilling to roll the dice on their stock-picking skills, the ETF path beckons.
The Vaneck Vectors Gold Miners ETF (NYSEARCA:GDX) is Wall Street’s most liquid avenue for buying a basket of gold stocks. With Friday’s rally and this morning’s follow through, GDX is once again testing resistance at $21.50. And I suspect a breakout and additional upside is just a matter of time.
Buy GDX with a stop below $20.15.
Agnico Eagle Mines (AEM)
Click to Enlarge
Friday’s rally in Agnico Eagle Mines (NYSE:AEM) was impressive. The 4.3% rip carried AEM stock from the lower to the upper end of its two-month base in a single session. With AEM now sitting atop all major moving averages, it’s well positioned to accelerate its recovery higher.
Watch for a break above resistance at $41.50 to confirm the completion of the recent basing pattern. Old support near $44 is the next upside target.
AEM stock options boast sufficient liquidity for a short premium play. Sell the March 39 puts for 90 cents.
Franco-Nevada Corp (FNV)
Click to Enlarge
As one of the largest holdings of GDX, Franco-Nevada Corp (NYSE:FNV) looks similar to the posture of the ETF. With last week’s rally, FNV now sits well above a rising 20-day, 50-day and 200-day moving average. Distribution days have been absent for the past six weeks showing little selling aggression beneath the surface.
The pair of pullbacks from early-January both tested and held support near $68, so that’s the line in the sand for bulls. Provided we remain above it, buyers deserve the benefit of the doubt, and the path of least resistance is higher. The next two resistance zones of $76 and $80 are logical upside targets.
FNV options don’t offer much liquidity, so would-be buyers should go with a straight stock play.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to protect your portfolio against a market crash.
