Is it time to buy Barrick Gold Corporation GOLD, Golden Star Resources GSS, and Franco-Nevada Corporation FNV?
Many parts of the stock market look weak, but that's not the case with the gold companies. A number appear to be on the verge of a breakout because gold could be about to make a large move higher.
What To Know: On Aug. 5, 2020, the price of the metal broke the $2,000 per ounce level. It trended lower until March when it found support around $1,685. Since then, it has staged a rebound.
Now gold is trading around $1,780. There’s resistance at this level and it has put a ceiling on the price. If this resistance breaks, gold could break out and make a large move higher.
Related: Best Gold Stocks
Barrick Gold has hit resistance at $22.50. Resistance has formed at this level because it was support from late November through early February.
Investors who bought the stock at that time regret buying it because they're now losing money. Many of them decide to sell, however, they're reluctant to take a loss.
So they decide they will sell the stock if it rallies back up to their buying price. As a result, sell orders are placed at the level that had been support. If there are enough of these orders, resistance will form as it did here.
If this resistance breaks, it will mean the sellers who formed it are gone. They have finished or canceled their orders. Buyers will have to pay higher prices if they want to acquire shares, which will force the stock into rally mode.
The same dynamic occurred in Golden Star Resources. The $3.50 level has been support, but has converted into resistance. If the shares clear this level, they could make a big move higher.
When stocks are trending higher, the bulls are in control; If they're trending lower, it's the bears who are in charge. The break of an uptrend line shows a change of this leadership.
Franco Nevada has been trending higher and as long as the stock remains above its uptrend line, it will continue to do so.
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