NovaGold Resources - NG - close: 7.36 change: +0.45
Why We Like It:
Inflation, deflation, sovereign debt default, geo-political risk, safe-haven, diversification... take your pick on why gold is going up. The price of gold has broken out to new all-time highs over $1,250 an ounce. While some call it a bubble many believe this trend could last a long time. We already have the GLD gold ETF on our watch list but we're waiting for the right entry point. In the mean time I suggest readers take a look at NG.
NG is not overbought and extended like so many of its peers. Yet the trend is still bullish. The stock has been consolidating sideways on either side of $7.00 for the last four weeks. Friday's big move looks like a bullish breakout fueled by strong volume. This play isn't without risk. NG is probably underperforming its peers for a reason. If you look at their earnings results NG continues to lose money.
I consider this an aggressive, speculative play on the gold miners, which can be a very volatile group. I'm suggesting bullish positions now with a stop loss under the 200-dma (near $6.26). More cautious traders could use a stop near $6.50. Our first target is $9.00. Our second target is $9.90. I prefer the stock over the option because the spreads on the option are so wide.
NovaGold is a growth-focused precious metals company engaged in the exploration and development of mineral properties in North America. The Company has a portfolio of mineral properties located in Alaska, USA, and British Columbia, Canada. The Company's largest projects are being advanced with major mining companies. The Donlin Creek project is held by a limited liability company owned equally by NovaGold and Barrick Gold U.S. Inc. The Galore Creek project is held by a partnership owned equally by NovaGold and Teck Resources Limited. NovaGold owns a 100% interest in the Rock Creek, Big Hurrah and Nome Gold deposits in Nome, Alaska, and in the Ambler deposit in northern Alaska. NovaGold has one of the largest reserve/resource bases of any junior or mid-tier gold company and trades on the TSX and NYSE-AMEX under the symbol NG. (source: company press release or website)
I prefer buying the stock over the option but we're listing both. The spreads on the options are a pretty wide!
Keep your position size small to limit your risk!
Buy the Stock: NG @ current levels, stop loss: 6.25
- or -
Use the 2011 January calls (Entry point - now, at current levels)
BUY CALL 2011 JAN $7.50 strike (NG1221A7.5) current ask $2.50/bid $1.70
Chart of NG:
Weekly Chart of NG: