Buy Alert: December 5, 2014

| December 5, 2014

Buy Alert: December 5, 2014


Option Strategy:

Buy Barrick Gold (ABX) February 20, 2015 $10.00 puts for $0.40 or better.


Commodity Outlook: Gold

This morning’s US jobs report was exceptional. Employers added a whopping 321,000 jobs last month. Without question, this was one of the best job reports in years.

While it’s good news for the US economy, it’s bad news for gold…

Not only is the US economy gaining steam, but inflation is still running at benign levels near 1.7%. Given the current economic backdrop, there’s very little reason for investors to buy gold right now.

As a result, it’s likely gold miners continue bleeding lower along with gold in coming months.

Here’s a great way to profit from weakness in the yellow metal…


Resource Company: Barrick Gold (ABX)

ABX is a $14 billion market cap Canadian gold miner with a global operations footprint. Shares of the producer are down 31% year-to-date thanks to the extended weakness in the gold market.

Adding uncertainty to ABX outlook is the fact the company is going through a management shake up right now. The company just fired its CFO due to poor performance.

To top it all off, ABX has one of the highest debt loads in the large-cap gold mining space. If gold continues lower in coming months, investors will likely shed ABX shares since it’s at higher risk of financial trouble than its peers.

So here’s what we’ll do…

Buy the ABX February 20, 2015 $10.00 puts for $0.40 or better.

The current bid/ask spread for this contract is $0.34/$0.36.

Do not pay more than $0.40 per contract!

Our official entry price for performance tracking is $0.36. Your price may be higher or lower.

Exit Strategy:

Barrick Gold

Remember, we want ABX to trade lower. Our first profit target is $10.00, while our second target is at $9.00.

The risk control price for this trade is $12.75. If ABX trades above that level, conservative investors should consider closing this trade to preserve capital.


Category: Commodity Trading