On June 1 the SPDR Gold Trust (ARCA:GLD) jumped almost $6, moving the price right near short-term resistance. Some other gold stocks lead that rally, moving higher over the last couple weeks, but now they too are testing resistance. How these gold stocks react around resistance can not only help determine the most likely short-term direction of these stocks, but it can also provide insight into the likely direction of gold prices.

Allied Nevada Gold Corp. (NYSE:ANV) has been in a downward trend channel since hitting a 52-week at $45.90 in September. After testing the low of that channel in the middle of May, the stock has been rallying aggressively. While the stock still remains within the trend channel, a test of the channel resistance could be in order. Primary trend channel resistance is at $32. A breakout above that price may not immediately lead to a further spike in the price, but is bullish over the longer-term. With the trend still down, though, failure to move beyond $30 (minor resistance) and $32 is bearish, as the stock will likely begin moving back toward channel support - currently at $23.

SEE: Using Technical Analysis In The Gold Markets

Kinross Gold Corporation
(NYSE:KGC) has also been in a downward trend channel since September. Currently the stock is at channel resistance of $9, after recovering from a sharp sell-off in early May. A break above $9, especially a daily closing price, is bullish over the long-term, although $10 and $11 are also likely to be strong resistance levels if the stock continues to advance. A drop back below $8.50, on the other hand, could signal a decline back toward trend channel support. Support is at $7.

Market Vectors Gold Miners ETF (ARCA:GDX) is often considered a leading indicator for the price of gold. On May 17, GDX snapped higher and has been pushing higher since. Gold, on the other hand, didn't significantly thrust forward until June 1. Therefore, GDX may be giving a bullish signal for gold, but there are hurdles to clear before that signal is verified. There was a small sharp downward trend channel that occurred from March to the middle of June in GDX. This was recently broken by the aggressive rally and the stock is now targeting resistance in the $50 region. Throughout 2011, the area between $50 and $52 (approximately) was a support region, but as the ETF broke below this region in 2012, it became resistance. If the ETF is to continue higher, it will need to clear this resistance band. If the stock can't break through, a decline is likely to ensue; support is now at $44 and $42.

SEE: 8 Reasons To Own Gold

Barrick Gold Corporation (NYSE:ABX) also recently broke above its March to May downward trend channel. This puts the stock in a very similar position to the Market Vectors Gold Miners ETF - right at a strong 2011 resistance level. Throughout 2011, $43 to $44 was a strong support level, which is now likely to act as resistance. Barrick current trades near this level and the ability to break through it will play a significant role in the direction of this stock over the next few weeks and potentially months. A push above the resistance area is longer-term bullish, with an initial target of $47. If the stock can't get through the resistance region, look for a decline back toward support, currently at $40 and $38.

The Bottom Line
Gold, along with gold stocks and ETFs, have made some impressive upside moves recently. Yet these four securities are all bumping up against support. Watching how these stocks react around resistance can provide insight into what the price of gold may do, but it also provides great trading opportunities. Failure to clear support is likely to be a good shorting opportunity, while passing through resistance is more of a longer-term bullish play. These securities, and gold, can be volatile; therefore, be sure to control risk when making trades.

SEE: How To Trade With Support And Resistance

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Charts courtesy of Stockcharts.com.

Related Articles
  1. Mutual Funds & ETFs

    Why ETFs Are a Smart Investment Choice for Millennials

    Exchange-traded funds offer an investment alternative to cost-conscious millennials who want to diversify their portfolios with less risk.
  2. Investing

    Asset Manager Ethics: Acting With Competence and Diligence

    Managers must make investment decisions based on their personal investment process, which in turn should be based on solid research and due diligence.
  3. Mutual Funds & ETFs

    Should Investors Take a BITE Out of This New ETF?

    ETF BITE offers a full menu of restaurants. Is now the right time to invest?
  4. Financial Advisors

    5 Things All Financial Advisors Should Know About ETFs

    Discover five things all financial advisors should know about ETFs, including when ETFs may be a better choice for your clients than mutual funds.
  5. Stock Analysis

    The Top 5 ETFs to Track the Nasdaq in 2016

    Check out five ETFs tracking the NASDAQ that investors should consider heading into 2016, including the famous PowerShares QQQ Trust.
  6. Chart Advisor

    2 Short-Term and 2 Longer-Term Trade Ideas

    Two shorter-term and two longer-term trade ideas to consider, based on trends and the possibility of a breakout.
  7. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  8. Chart Advisor

    ChartAdvisor for November 27 2015

    Weekly technical summary of the major U.S. indexes.
  9. Chart Advisor

    Pay Attention To These Stock Patterns Playing Out

    The stocks are all moving different types of patterns. A breakout could signal a major price move in the trending direction, or it could reverse the trend.
  10. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center