The gold bugs are at it again. It's been a tough year to be a backer of this popular precious metal, but that hasn't stopped it from grabbing the attention of traders and investors worldwide. These folks have taken a particularly keen interest the metal after its latest tumble into early April, but those who have lacked patience have had their heads handed to them on a golden platter.
The yellow metal is on track to log its largest quarterly decline on record, for a loss of approximately 24%. In fact, the last three-month decline to even come close to this quarter's plunge was in 1982, when it tumbled 18%.
Today the question arises once again: Should you be a buyer at these levels? Is it time for the gold bugs to safely stick their necks out once again? A glance at the session's top gainers going into the weekend clearly suggests they are giving it a shot! From a technical standpoint, I have to agree. They have a chance -- at least in the short term.
For many popular stocks within the gold sector, shares are forming a reversal strategy, which I call a "momentum reversal," on the daily time frame. It's the same strategy that helped us nail the low in Apple (AAPL) in April -- the one that led to a rally lasting several weeks before the stock once again gave way to the bears after it struck the initial upside target.
Source: TradeStation
While the strategy in gold is the same, so are the risks. Should we see a modest correction off lows in this daily-chart price zone, the price will still hold the risk of retesting levels these levels before the year is over. In the meantime, though, let's take a look at a few of the securities that are catching my eye.
Coeur Mining (CDE), through its subsidiaries, engages in the ownership, operation, exploration, and development of silver and gold mining properties primarily in South America, Mexico, the U.S. and Australia. Personally, I tend to trade silver more than gold, so it's of particular interest that this is a mining company does both.
Despite the flush to lower lows this month, Coeur shares have been striking some nice support on the monthly time frame, and the overall momentum of the recent selloff has been shifting over the past three months. Each lower low has merely served to flush out those who were just a bit too eager too soon.
Source: TradeStation
Coeur hit support with the 123.6% Fibonacci retracement zone at this week's lows when compared with the rally in the second half of last year, and the weekly time frame also faces trend exhaustion at these levels. All in all, it's one of my favorites. I'm expecting some initial resistance in this one to strike around $15, but I'm looking for at least $15.60 as a continuation of the current momentum reversal. Coeur closed Friday at $13.30.
Another company that catches my eye at these levels is Seabridge Gold (SA). A development stage company, it engages in the acquisition and exploration of gold properties located in North America and explores for copper, silver and molybdenum ores. The stock has a similar momentum shift on the daily time frame to that of Coeur, but it has enjoyed greater relative strength than what many of the other issues in its sector have shown.
Source: TradeStation
Additionally, Seabridge has been trading in a channel on the monthly time frame and is now testing the lower end of that channel, with a shift in momentum similar to the change that has been under way on the daily charts. All are strong signs that the stock is also poised to hold the monthly support zone. I am expecting a move into $12 over the next several weeks. Shares finished Friday at $9.43.
