Gold Stock Could Be a Steal Before Earnings

WPM is moving higher with gold futures, and the rally could have legs

by Andrea Kramer

Published on Aug 5, 2019 at 11:25 AM

As trade tensions between the U.S. and China heat up, investors are fleeing stocks for the perceived safety of tangible assets like gold. With futures on the malleable metal flirting with six-year highs, several gold stocks are shining today, including Wheaton Precious Metals Corp (NYSE:WPM) shares. What's more, WPM recently flashed a historically bullish signal suggesting traders may want to consider scooping up call options ahead of earnings this week.

WPM stock was last seen 3.5% higher to trade at $27.04. The equity has nearly doubled since its November lows around $15, and touched a roughly three-year high of $27.66 on July 30, before pulling back on last week's Fed comments.

WPM stock chart aug 5

What's more, last week Wheaton Precious Metals sported a Schaeffer's Volatility Index (SVI) of 126.3% -- in the bottom 20% of its annual range. In other words, WPM's short-term options were pricing in relatively modest volatility expectations for the shares.

Over the past three years, there have been four other times when WPM stock was within striking distance of a new 52-week high, and simultaneously sported an SVI in the bottom 20% of its yearly range. After those signals, the shares were higher 100% of the time a month later, averaging a gain of 9.46%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. A similar pop from current levels would put the gold stock just shy of $30 -- territory not charted in three years.

As alluded to earlier, Wheaton Precious Metals is slated to report earnings after the close on Thursday, Aug. 8. However, recent history favors the bears. WPM shares moved lower the session after three of the last four earnings reports, including a one-day drop of 8.1% after earnings last August.

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