NEW BEARISH Plays
Goldcorp Inc. - GG - close: 26.89 change: -0.41
Stop Loss: 28.75
Current Gain/Loss: unopened
Entry on May -- at $--.--
Listed on May 16, 2013
Time Frame: 6 to 8 weeks
Average Daily Volume = 7.3 million
New Positions: Yes, see below
Why We Like It:
GG is a Canadian gold mining company. They also produce silver, copper, lead, and zinc. Shares have been in a significant down trend for months. The GLD gold ETF has not yet tested its April low but GG is now breaking down below its April low. Traders could look at this as a simple momentum trade lower. Plus the rising dollar will continue to put pressure on commodities, including gold. Another issue is the strong stock market, which makes holding gold less attractive to most investors.
Another troubling issue for gold stock was the latest World Gold Council Gold Demand Trends report. According to the latest data gold jewelry demand was up strongly in Asia. Gold demand was up again in the Middle East. Even the U.S. saw a significant increase in demand. Yet overall global demand for the precious metal was down -19% in the first quarter from the fourth.
Looking at shares of GG I am suggesting new bearish positions now. More nimble traders could wait for a bounce back toward $28.00 as an alternative entry point. Ideally a failed rally near the 40-dma or 50-dma would be a better entry point but we may not see an opportunity like that for a while.
We will try and limit our risk with a stop loss at $28.75. I am setting our target at $22.00 but keep in mind that GG might bounce at the trend line of lower lows (displayed on the chart below). Gold and gold stocks can be volatile. I am suggesting we keep our position size small to limit our risk.
Suggested Position: short GG stock @ (the open)