Buy Alert: October 2, 2015

Buy Alert: October 2, 2015

 

Option Strategy:

Buy Newmont Mining $NEM November 20, 2015 $18.00 calls for $0.85 or better.

 

Commodity Outlook: Gold

This morning’s US jobs report was a huge disappointment…

For the month of September, US non-farm payrolls increased by a mere 142,000- a far cry from the 203,000 jobs economists were expecting.  Clearly, the US economy is hitting a soft spot when it comes to job growth.

The news has gold up sharply on the day.  As I write, the yellow metal is up $24.50 per ounce (2.23%) to $1,138.20.

Here’s the deal…

An unexpectedly weak September jobs report virtually guarantees the Fed will put off raising interest rates until at least early next year.  As you know, the US central bank has been putting forth the idea of a rate raise for over a year now.

But the fact is, the Fed simply can’t raise rates with the amount of economic uncertainty sweeping the global financial markets.

That’s a bullish situation for gold.

But here’s where it really gets interesting…

Gold is on the verge of breaking above a very important technical resistance trend line at $1,150.  Today’s rally has the metal tantalizingly close to a major bullish trend reversal.

One more day of strong upside and short sellers may trigger a massive short covering rally to the $1,200 an ounce area.

Today’s bullish action tells me we need have a low risk/high reward trade that will profit from rising gold prices.

Here it is…

 

Resource Trade: Newmont Mining $NEM

As long time subscribers may remember, we hit $NEM puts for a 100% gains in late 2014.  But now we’re going to attack the well-known gold miner from the long side.

Looking at a chart you’ll find the past few month’s trading action in $NEM has been incredibly volatile and choppy.

But if gold can break above $1,150 in coming days, there’s a very good chance $NEM breaks free from the bearish trading range that has kept it under wraps since early August.

So here’s what we’ll do…

Buy the $NEM November 20, 2015 $18.00 calls for $0.85 or better.

The current bid/ask spread for this contract is $0.74/$0.77.

Do not pay more than $0.85!

Our official entry price for performance tracking is $0.77.  Your price may be higher or lower.

Exit Strategy:

Remember, we want $NEM to trade higher.  Our first profit target is $19.00 while our second target is at $21.00.

Our risk control line is $15.00.  If $NEM trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Category: Commodity Trading