Buy the Dip on This Gold Stock

GOLD just fell to a historically bullish trendline

by Patrick Martin

Published on Mar 10, 2020 at 2:40 PM

As gold prices and safe haven assets skyrocket in the face of the global economic sell-off, mining stocks such as Barrick Gold Corp (NYSE:GOLD) have weathered the storm. GOLD hit a three-and-a-half year high of $22.44 on Feb. 24, and although its taken a breather since then, data from Schaeffer's Senior Quantitative Analyst Rocky White suggests the stock may be flashing a buy signal as it nears a historically bullish trendline.

Specifically, Barrick Gold stock has come within one standard deviation of its 40-day moving average following an extended period above the trendline, defined for this study as having traded north of the moving average 60% of the time in the past two months and in eight of the last 10 trading days. The equity has seen four similar pullbacks within the past three years, which has resulted in an average 21-day gain of 8.31%.

Barrick Gold Stock Chart

At last check, GOLD was trading at $19.54, down 1.6% for the day. A move higher of similar magnitude would put the stock a chip-shot from those late-February highs once more. The shares have held on to their year-to-date breakeven point amid this month's bout with volatility, and remain up 48% in the last 12 months.

Options traders, meanwhile, are picking up long calls at a quicker-than-usual clip. This is per the security's 10-day call/put volume ratio of 5.80 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the elevated 67th percentile of its annual range. 

Digging deeper, the March 24.50 call is home to the largest change in open interest during this time period. Buyers of this call are expecting big gains from the mining stock in the next two weeks, when the options expire.

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