The attention of many active traders has been predominantly on health care, technology, and precious metals over the past couple of weeks. Based on the charts discussed below, it appears as though even more attention will be given to gold and likely other precious metals as their prices move beyond key levels of resistance. The shift to relatively stable segments such as gold could even be a leading indicator of broader market volatility to come.
SPDR Gold Shares (GLD)
The followers of technical analysis who want to get a better understanding of where gold is headed often analyze exchange-traded funds such as the SPDR Gold Shares (GLD). This fund represents the most popular product used by retail investors to access gold due to it having the largest physically backed gold portfolio of any exchange-traded product.
As you can see from the chart below, the price has been trading within a defined range for much of the past year. Notice how recent price action took the price beyond the resistance of the upper trendline and how the momentum has dramatically increased since the break. Active traders spend hours scouring the markets for influential trendlines and trading setups in which they look to profit from the surge in momentum that often follows.
Barrick Gold Corporation (GOLD)
Market players who want to trade the rise in gold will most likely look to the largest gold miners since the metal's market price directly affects profitability of these companies. In the case of Barrick Gold Corporation (GOLD), which represents one of the world's largest gold miners, you can see that the price of the stock has recently moved above a short-term ascending triangle pattern shown by the blue circle. This type of breakout is often used by traders to signal the next leg of the uptrend. Initial target prices will likely be set near $38, which is equal to the entry point plus the height of the pattern.
Newmont Corporation (NEM)
Another major mining company that will likely make its way onto the radar of active traders over the days ahead is Newmont Corporation (NEM). As you can see from the chart below, the price has recently surpassed the resistance near $69 (shown by the blue circle) on above-average volume, which suggests that the bulls are in control of the momentum. From a risk-management perspective, stop-loss orders will most likely be placed below the trendline or the 50-day moving average ($60.55), depending on risk tolerance and outlook.
The Bottom Line
The price of gold has been marching higher over the past several weeks. The increased buying pressure has resulted in the price of gold and the major gold miners to move beyond influential trendlines. The breakouts discussed will likely lead to even more buying interest over the days and weeks ahead, potentially marking the early stages of a longer-term move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.