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1 Stock to Buy, 1 Stock to Short: Mining

ABX is at an attractive entry point for a buy


All day I scan the charts looking for technical patterns to trade. My Trending 123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two polar opposite technical events for these two stocks.

Buy the Bottom Triangle

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Barrick Gold Corp.
(ABX) is a gold and copper miner and distributor that has developed a bottom triangle over the past 26 days. Since the amount of time a pattern takes to develop can affect how long it takes to play out, this makes for an intermediate-term trade (six weeks to nine months).

Barrick Gold’s price seems to have reached a bottom, showing signs of reversal as it has broken upward after a period of uncertainty or consolidation. A bottom triangle shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range, reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks above the upper trendline with a noticeable increase in volume, confirming this bullish pattern as a reversal of the prior downtrend.

Recommendation: Buy ABX for a $23.20 – $24.00 target.

Short the Bearish Continuation Diamond

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Thompson Creek
(TC) is a diversified mining company that has developed a bearish continuation diamond over the past 190 days, making this a long-term trade.

The price has broken downward out of a consolidation period, suggesting a continuation of the prior downtrend. The continuation diamond pattern begins during a downtrend as prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks downward out of the diamond’s boundary lines, it marks the resumption of the prior downtrend.

Recommendation: Short TC for a $1.30 – $1.80 target.

Article printed from InvestorPlace Media,

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