But I also carried an unnerving suspicion buyers would strike as soon as I dropped my guard…
Gold futures sliced through our breakout level last week, closing at record highs:
Unbelievable… Or, better yet, undeniable.
Gold not only hit a new all-time high, it broke out with authority as it gained more than 4% last week.
The path of least resistance points higher toward 2,500 (our initial objective). But the price of gold could go much higher.
Gold is embarking on a new secular bull run:
As it rips to new heights, it will take the entire metal and mining space along for the ride.
But we’re in the early innings of an uptrend that could last for years to come.
Instead of catching falling knives or taking cute catch-up trades, it’s best to simplify our strategy and buy the strongest names.
Gold mining stocks have suffered for years, and a handful of names were absolutely clobbered last month. A few gold miners are even offering up the mother-of-all mean reversion trades.
There will be a time to trade those names. Or, perhaps there won’t.
I’ll pass on buying low in favor of a far safer route — buying strength on absolute and relative terms.
Here are three of my favorite gold mining setups approaching critical breakout levels:
Alamos Gold $AGI
Alamos Gold, a $5.5B company based in Toronto, has held a top spot on my gold miners list since it completed a multi-year base in 2022:
I like a big base breakout as much as the next trader. But the relative uptrend versus the Gold Miners ETF $GDX (lower pane) captivates me.
We always aim to own the strongest. And AGI has outperformed the broader mining space for almost two years.
I like buying AGI on a break above 14.25, targeting 21.50.
Gold Fields $GFI
Gold Fields, a $13.5B company based in South Africa, is also outperforming GDX as it challenges a decade-long supply zone:
A decisive close above 16 triggers a buy signal, setting an initial target of 24.50 and a secondary objective of 38.50.
Perhaps it’s only a matter of time before these two stocks resolve higher. Nevertheless, we have no business holding long positions below our breakout levels.
Eldorado Gold $EGO
EGO, a $2.5B company based in Vancouver, British Columbia, completed a multi-year inverted head and shoulders last fall. But it was destined to fail, slipping back into its prior range earlier this year:
I want to give Eldorado Gold another chance if and when it reclaims 12.25. A daily close above that level brings EGO back into the fold with an initial target of 16.50 and a longer-term objective of 25.
It’s the perfect environment to buy mining stocks following gold’s breakout.
The plan is simple: Buy the strongest names on absolute and relative terms – if and when they trade above our risk levels.
If they cross back below our line in the sand, we dump them.
Buenaventura $BVN, Harmony Gold $HMY, and Osisko Gold Royalties $OR continue to work.
More mining stocks will follow these leaders in the coming weeks and months. I’ll track their developing strength and outline their respective breakout levels as they come into focus.
Now it’s time to play follow the leader.
All you have to do is buy strength on the breakout and manage risk accordingly.
