Gold's beginning to glitter again.
After treading water since gold prices peaked last summer, everyone's favorite precious metal is starting to show some key signs of strength again -- and gold miners are the best way to play the trend.
Mining stocks are basically a leveraged bet on gold prices. Because every marginal dollar gold miners get for extracting gold beyond their break-even point has an even bigger impact on profitability than the last, a rising-gold-price environment means industry earnings scale up at a rapid rate. And that means, as gold prices find their footing in 2017, some of the gold industry's biggest players are teetering on the edge of breakout territory this spring.
As usual, stock selection matters a lot. During gold's big run-up in early 2016, the delta between the segment's strongest performers and the laggards was huge. And that's why it makes sense to turn to the charts to figure out which are showing buy signals to traders.
In case you're unfamiliar with technical analysis, here's the executive summary: technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Without further ado, here's a rundown of four technical setups that are showing solid trading potential right now.
Randgold Resources Ltd.
Leading the list is $9 billion mining stock Randgold Resources Ltd. (GOLD) . Randgold has been in rebound-mode in 2017, charging more than 22% higher since the start of the year. But don't worry if you've missed that upside move in Randgold. Shares are pointing toward a second leg higher in April.
Randgold has spent the past couple of months forming an ascending triangle pattern, a bullish continuation setup that's formed by horizontal resistance up above shares at $95, and uptrending support to the downside. Basically, as Randgold has pinballed in between those two technically significant price levels, shares have been getting squeezed closer and closer to a breakout through that $95 price ceiling. When that happens, we've got a new buy signal in this mining stock.
Relative strength, measured by the indicator down at the bottom of Randgold price chart, adds some extra confidence to upside in shares. That's because GOLD's relative strength line has been in an uptrend of its own since late December, an indication that this stock isn't just beating the rest of the metals industry, it's still beating the rest of the broad market in the long run. As long as that uptrend in relative strength stays intact, Randgold is predisposed to outperform in 2017. Wait for a material push through $95 before you pull the trigger.