Gold is waking up into year-end. So are gold stocks. Today we’ll share four ways to bank on the yellow metal’s resurgence.
With stocks booming in the fourth quarter, demand for precious metals has ebbed. The logic makes sense. When the risk-on switch flipped, the pull of equities and higher profit-giving assets outweighed that of metals. The potent combination of a trade war resolution and bullish seasonality provided all the excuse needed to jam stocks higher into year-end.
But here’s the curious thing: Gold and gold stocks are seeing massive inflows too. Shares of the world’s top gold miners are breaching resistance are returning to uptrending status. We’ve scoured the industry and found four of the best stocks to buy if you think gold’s new bull market has legs.
Take a look.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) shares rally ahead came just in time for Christmas. The jump completed a multi-month rounded bottom pattern and signaled its intermediate-term uptrend is back on track. GOLD stock is now perched above a rising 20-day, 50-day, and 200-day moving average.
The next two upside targets are resistance zones at $19 and $20.
Ever since its mid-November earnings report, volume patterns have weighed heavily in favor of bulls with accumulation days multiplying and distribution days all but disappearing.
Implied volatility is low at the 13th percentile of its one-year range. This suggests long premium plays are a smart move.
The Trade: Buy the February $18/$21 bull call spread for 90 cents.
Newmont Mining (NEM)
This week’s breakout pushed Newmont Mining (NYSE:NEM) shares to a three-year high. Blasting above a resistance zone that has kept a lid on price advances for years is a big deal and underscores just how powerful the demand for gold stocks has become.
NEM stock is rallying above a rising 20-day, 50-day, and 200-day moving average. The momentum increase during this week’s advance suggests any weakness that crops up in the near-term is a buying opportunity.
Newmont shares have become overbought in the short run, so it wouldn’t surprise me if some consolidation is in order. Wait for a down day or two, then deploy bull trades.
The Trade: Buy the February $42/$45 after a pullback emerges.
Franco-Nevada (FNV)
While its predecessors are flirting with multi-month and multi-year highs, Franco-Nevada (NYSE:FNV) just broke out to an all-time high. The past four-month consolidation pattern took on the form of a cup-and-handle with resistance at the psychologically significant $100 level.
Tuesday’s rally finally eclipsed the pivotal zone, and this morning’s jump signals follow-through. Unfortunately, the strength is fading fast at the time of this writing, so a re-test of $100 over the coming days could be in store. As long as we don’t fall back below the 20-day moving average near $98.50, the breakout is still worth betting one.
The lower implied volatility favors long calls or call spreads.
The Trade: Buy the February $100/$105 bull call spread for around $2.50.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals (NYSE:WPM) had one of the clearest breakout setups heading into this week. For months, $28.50 had been an area where rallies went to die. Until this week.
Monday and Tuesday scored huge upside that finally felled resistance. This morning’s strength is adding to the gains with a push toward the 52-week high of $30.90.
The momentum surge is reflected by the 20-day moving average distancing itself from the 50-day. While some backing-and-filling could be in order following three outsized up days, weakness was born to be bought.
Once again, implied volatility is depressed favoring long premium plays.
The Trade: Buy the February $30/$32 bull call spread for around 72 cents.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
