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Gold Under a 'Death Cross' -- How to Trade Mining Stocks

NEW YORK ( TheStreet) -- The bull market for gold was confirmed Feb. 11, 2009, when it started at $944.50 a troy ounce on the first day of what's called a "golden cross," in which the 50-day simple moving average rose above the 200-day.

Gold rallied to an all-time high of $1,923.70 on Sept. 6, 2011, and then declined to $1,523.90 on Dec. 29, 2011, before ending the year at $1,565.

At the end of a calendar year, my proprietary analytics calculate new annual, semiannual, quarterly and monthly value levels, pivots and risky levels for every market and stock.

For gold in 2012, my annual pivot is $1,575.8. It's called a pivot because this level was above the year's close and was quickly taken out to the upside. This breakout targeted my semiannual risky levels, which are at $1,635.8 and $1,659.4. A breakout above these semiannual levels had the bulls looking for new highs, but gold stopped rising at $1,792.7 on Feb. 28, 2012. As this strength evolved, I became worried about a potential "death cross" for gold.

A "death cross" is the opposite of a "golden cross," when the 50-day simple moving average falls below the 200-day. As a precursor or warning, I noted that gold had an 85% chance of returning to my semiannual pivots at $1,659.4 and $1,635.8. These levels have been strong magnets since March 14.

The "death cross" for gold occurred April 17 and remains in effect, with the 50-day simple moving average at $1,681.9, below the 200-day at $1,696.6. Note that since this confirmation, my semiannual pivots have remained magnets and could continue to do so through June.

My longer-term market call for gold is negative, as I look for weakness back to my annual pivot at $1,575.8, most likely in the second half of 2012.

Today I will profile six of the 18 gold-mining stocks that are rated "buy," according to ValuEngine:

Each of these experienced a "death cross" well before gold, and they set a 52-week low Monday, so they are cheap versus the chart pattern for gold.

Barrick Gold has a one-year price target at $44.43. Investors should consider adding to positions on weakness to my weekly value level at $37.20 and booking some profits on strength to my semiannual risky level at $44.52.

AngloGold has a one-year price target at $37.61. Investors should consider adding to positions on weakness to my weekly value level at $29.90 and booking some profits on strength to semiannual and annual risky levels at $36.71 and $37.21.

Goldcorp has a one-year price target at $44.34. Investor should consider adding to positions on weakness to my weekly value level at $39.22 and booking some profits on strength to my monthly risky level at $48.05.

Harmony Gold has a one-year price target at $10.28. Investors should consider adding to positions on weakness to my semiannual value level at $8.39 and booking some profits on strength to my monthly risky level at $11.01.

IAMGold Corp. has a one-year price target at $13.40. Investors should consider adding to positions on weakness to my weekly value level at $10.40 and booking some profits on strength to my monthly risky level at $14.74.

Newmont Mining has a one-year price target at $52.17. Investors should consider adding to positions on weakness to my weekly value level at $40.84 and booking some profits on strength to my annual risky level at $53.89.

I have no conflicts with any of these stocks. Newmont Mines is in my ValuTrader Model Portfolio, a subscription newsletter available at www.ValuEngine.com.

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