Market Overview

Barrick Gold - Should You be Buying ABX? Pro's Accumulating

Gold mining stocks have been hit very hard this year, and some professional traders are beginning to position themselves as if the bottom might be in.

One that appears interesting is Barrick Gold (NYSE: ABX).

The stock has plummeted this year, and with good reason. Not only have gold prices dropped by a lot, the company has written off billions of dollars as assets became worth far less in this new environment.
The pro’s have been thinking this might occur for months, take a look at the stock and you can see continued selling pressure far before the company announced their problems.

Barrick then announced during the second quarter, 2013 results, that they are writing off $8.7 billion in assets. The firm is also being proactive in reducing or closing mine production if it’s uneconomic.1

In the financial releases, the company stated, “For the remaining operations with expected 2013 AISC above $1,000 per ounce, we will either change mine plans, suspend, close or divest these assets to improve cash flow.”2

The company is focused on improving and maximizing cash flow at every mine, which is a good thing for shareholders.

Yes, if you’ve been holding the stock this entire time you’re feeling the pain, but this is why we here at advocate taking a pro-active approach to your investments.

If you had followed the pro’s, you would have been out of this stock for some months. At this point, the stock appears to have hit the bottom. With the stock trading at a forward P/E of just over 8, any improvement in the price of gold will be incredibly positive for this stock. At this point, the valuation is beginning to become quite compelling.


The stock has just recently broken a downtrend resistance line, which indicates to us that much of the selling pressure has been finalized.

Another interesting occurrence, a very large trader bought 10,780 of the $28, January 2015 calls. This is a very large position, and one that the trader is willing to wait until 2015. This is quite a bullish call, seeing as the stock is just over $19 and the price of the calls was $1.99.

The $28 is a key level to watch, and we would also note that the $36 will also be very important, if the stock can continue moving higher.

This doesn’t mean that the stock is guaranteed to move up, simply that our opinion is that much of the selling pressure appears to be over and other traders/investors are now positioning themselves for a larger move up.

If you would like to know how we would create a trading strategy using companies like ABX, then check out our Flagship Newsletter or the Aggressive Investor Newsletter. If you would like to know how we would create a trading strategy for ETF's, then check out the ETF Total Return Newsletter.

Or we can teach you in a one-on-one coaching session on how to improve your trading and investing skills.

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By Joel Laceda - August 13, 2013

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Commodities Markets Trading Ideas


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