NEW YORK (TheStreet) -- On Nov. 5, gold mining companies Barrick Gold (ABX) , Yamana Gold (AUY) , Goldcorp (GG) and Newmont Mining (NEM) were trading at levels not seen either before or after the gold bubble inflated -- then popped. At that time these gold miners were extremely oversold compared to Comex gold futures.
Must Read: Warren Buffett's Top 10 Dividend Stocks
A key reason to own gold stocks is that these shares provide a hedge against a potential popping of equity bubbles. For example, the Dow Jones Industrial Average (DIA) lost 64% of its value between October 1929 and December 1935, while shares of Homestake Mining (owned by Barrick Gold since 2002) gained more than 500% over the same time frame. That logic still holds.
The bubble for Comex gold initially began to inflate from $730.3 per Troy ounce in Oct 2008. The bubble peak was $1923.70, set in early September 2011.
Comex gold traded as low as $1130.4 on Nov. 7, with the four gold mining stocks setting their lows between Oct. 31 and Nov. 14. Since these lows the gold mining stocks have outperformed.
Barrick Gold ($12.06) traded as low as $10.90 on Nov. 5, giving investors the opportunity to buy weakness to $11.33. The weekly chart for Barrick is negative but oversold, with its key weekly moving average at $12.66.
Investors should add to long positions using a "good 'til canceled" limit order to buy weakness to key the technical level at $11.05.