This week I want to recommend a bullish trade on Barrick Gold Corporation (NYSE:GOLD). Barrick is a gold-mining company, so this could be considered a bullish trade on a safe-haven asset through a stock.
My indicators were giving bullish readings last week, a mild upgrade from my previously neutral readings. While I am still skeptical of this rally, there has been some good news on the COVID-19 front.
And from a technical perspective, one of the reasons for the uptick in my indicators is that market breadth, or the ratio of advancing stocks to declining stocks, has improved.
Daily Chart of S&P 500 Index (SPX) — Chart Source: TradingView
However, you can see below that the S&P 500 is still well below both its 50-day (red line) and 200-day (blue line) moving averages. The market is not out of the woods yet.
Safe-haven assets like gold are still rising, even as the market makes big leaps higher, and GOLD is an indirect way to take advantage.
The Major Indexes Could Open Lower
As of this writing, futures are pointing toward a lower open. The Organization of Petroleum Exporting Countries and Russia (OPEC+) have agreed to cut oil production by nearly 10 million barrels per day.
That should be good news, so I think a lower open means investors are correcting after last week’s rally. The market may have risen too far too fast.
And it isn’t as if investors have returned to normal. Gold is nearly trading at $1,700 per ounce. The precious metal is at its highest levels since 2013.
Daily Chart of Gold Prices — Chart Source: TradingView
The big push into a safe-haven asset means investors still aren’t confident in the market, so any bullish trades need to be carefully selected.
Higher gold prices should theoretically be good for GOLD, so a simple call option is a great way to take advantage.
GOLD has Already Started to Rise
In the chart below, you can see just how well GOLD is doing now that gold prices have risen again. The company’s stock is tapping resistance, and if investors continue looking for ways to benefit from all this precious metal buying, it could break above $22.50 and push higher.
Daily Chart of Barrick Gold Corporation (GOLD) — Chart Source: TradingView
Regular readers know I never want to “buck the tape,” or go against the action in the market. Sometimes, that means looking for creative ways to take bullish positions like this one.
If GOLD pulls back this morning, traders should have a chance to enter the stock before its next rally pushes it above resistance.
Buy to open the Barrick Gold Corporation (GOLD) June 19th $21 Calls (GOLD200619C00021000) at $1.65 or lower.
InvestorPlace advisor Ken Trester also brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.