Many of the gold mining stocks that short-term traders and active investors had become accustomed to trading have slipped into bear-market territory with the latest correction. While exchange-traded funds (ETFs) representing these stocks as a whole -- like the Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ) -- have been in bear-market territory for many months, individual gold mining stocks like Newmont Mining (NEM) and Royal Gold (RGLD) are only recently trading below their 200-day moving averages.
The problem with this is that many traders have a discipline that prevents them from buying stocks and ETFs once they have closed below the 200-day moving average. Fortunately, while this does take many gold miners off the table -- and with them, both of the major gold mining ETFs -- there are a few gold mining stocks pulling back above their 200-day moving averages that short-term traders and active investors may be able to take advantage of over the next few days.
After closing lower for three days in a row, and down nearly 5% in trading on Wednesday, shares of Yamana Gold (AUY) are back in oversold territory above their 200-day moving average. The current sell-off in the stock comes in the wake of a rally to new 52-week highs reached at the end of February. In the first leg down, AUY finished lower for four out of five trading days before a two-day rally sent the stock higher by more than 4.5%.
Shares of Randgold Resources (GOLD) are also trading oversold in bull-market territory. GOLD has finished lower for three sessions in a row, pulling back by 3.5% on Wednesday, and is now at new two-week closing lows. Like Yamana Gold, Randgold was trading in oversold territory as recently as last week, part of the same sell-off that led to rallies in Yamana and other gold stocks.
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David Penn is Editor in Chief of TradingMarkets.com
Disclaimer: The views represented in this column are those of the individual authors only, and do not necessarily represent the views of Schaeffer's Investment Research.
Recent XIV Action May Bode Well for Bulls
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