2 Gold Stocks to Trade Without Breaking the Bank

Premium buyers can find a relative deal on Barrick Gold and Agnico Eagle Mines

Mar 27, 2017 at 3:08 PM
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Stocks have been suffering recently, as traders call into the question President Donald Trump's ability to follow through on several campaign promises. Amid this risk-off backdrop, gold prices have been booming as traders flock to safe-have assets. As gold futures linger near their highest level in more than a month, shares of gold stocks Barrick Gold Corp (USA) (NYSE:ABX) and Agnico Eagle Mines Ltd (USA) (NYSE:AEM) are also getting a lift. Plus, with the options market pricing in low volatility expectations for both ABX and AEM, it could be a prime time to trade gold without breaking the bank.

Short-Term Options Attractively Priced on Barrick Gold Stock

ABX, for instance, is trading up 2.6% at $19.71. The stock has surged nearly 43% since hitting its most recent low of $13.80 in mid-December -- after the Fed raised interest rates. While the shares have pulled back since their Feb. 17 six-month high of $20.78, they took a quick bounce last week near $19.15, home to a 23.6% Fibonacci retracement of their December-to-February rally. Below this, ABX stock could find a short-term foothold in the $17-$18 region, home to peak put open interest in the standard April options series.

With technical support seemingly in place and room for upgrades to help lift the shares -- 69% of analysts maintain a "hold" or worse rating -- options traders may want to give Barrick Gold Corp stock a second look. What's more, ABX sports a Schaeffer's Volatility Index (SVI) of 33%, in the low 5th percentile of its annual range, meaning near-term options are attractively priced, from a volatility standpoint. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) of 79 indicates the shares have tended to make bigger moves relative to what the options market has priced in, a boon to premium buyers.

Agnico Eagle Mines Stock on the Cusp of a Bullish Crossover

AEM, meanwhile, has added 24% year-over-year. Today, the shares are up 2% at $44.72 -- back above the $44.65 level, which marks a 38.2% Fibonacci retracement of the stock's 2016 sell-off. Plus, the shares are on the cusp of staging a successful crossover of their 50-day moving average, one of the best "buy" signals last year, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Analysts have been sitting on AEM's sidelines, as well, with the majority of those covering the shares maintaining a tepid "hold." With the door open for a round of bullish brokerage notes to draw fresh buyers to AEM's table, now may be an affordable time for short-term options traders to strike. While Agnico Eagle Mines Ltd's SVI of 34% ranks lower than 97% of all comparable readings taken in the past year, its SVS is perched at a lofty 99.

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