Wall Street’s strong bull run has continued into the final trading days of the first month of the new year, leading many equity investors to believe that 2013 will be quite prosperous. Upbeat corporate earnings and solid economic data releases, including December’s better-than-expected durable goods orders report, have served as fundamental catalysts behind the stock market rally. Amid the improving sentiment, precious metals prices have understandably suffered as investors are opting for risky assets in lieu of safe haven ones; however, there might be some “bargain shopping” opportunities for risk-tolerant investors looking to dip their toes in the gold miners space [for more market news and analysis subscribe to our free newsletter].
Mining bellwether Barrick Gold (ABX) has gotten absolutely crushed since the start of 2012; since October of last year, this stock has consistently posted lower-highs (red line) similar to gold’s price pattern, showcasing the lack of interested buyers on both the precious metals commodity and equity fronts. While the longer-term trend at hand is undeniably bearish for ABX, this company has been showing signs of bottoming out in recent months. Notice how ABX has managed to keep afloat above the $32 level (blue line), which it previously rebounded off in early August of 2012.
ABX has been grinding along support (blue line) since mid-November of 2012, which is by no means encouraging, however, it does suggest that buyers have been steeping in at these low levels. While some might interpret recent price action as consolidation given that support continues to hold, we advise conservative investors to hold off from jumping in long at current levels despite the lucrative upside potential; we recommend waiting for this stock to settle above its 200-day moving average (yellow line) before establishing a long position [see 5 Commodity Trading Mistakes You Could Be Making].
If upbeat earnings and encouraging economic data continue to roll in, precious metals futures prices and miners alike may continue to face strenuous headwinds; in terms of technical downside, ABX has major support around $32 a share. An equity market pullback in the coming day could pave the way higher for ABX, however, the real fundamental catalyst will come on February 14, 2013 when the company reports quarterly performance results. If bullish momentum returns to this stock it will first need to conquer immediate resistance around $36 a share before attempting to climb back over its 200-day moving average. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Disclosure: No positions at time of writing.