Buy Alert: September 19, 2014
Buy Alert: September 19, 2014
Option Strategies:
Buy Newmont Mining (NEM) November 21, 2014 $24.00 puts for $1.10 or better.
Buy Agnico Eagle Mines (AEM) November 21, 2014 $30.00 puts for $1.60 or better
Commodity Outlook: Precious Metals
No doubt about it, the resurgent US Dollar is wreaking plenty of havoc on commodities. Gold and silver are getting hit hard today as the Greenback attempts to break above important technical resistance at 85.
If the currency breaks and holds above this level (which is starting to look very likely) we’ll see additional selling in gold and silver in coming weeks.
With silver falling below important technical support at $18 an ounce today, the metal may trade down to $15.
And that’s not all…
Gold is in danger of falling through important technical support at $1,200. If the yellow metal drops below that level we could a quick sell-off to the $1,150 area or lower.
If a big precious metals sell-off comes to fruition, investors will likely dump gold and silver miners with reckless abandon in coming weeks.
Here’s how we’ll play the additional downside potential in precious metals…
Resource Company #1: Newmont Mining (NEM)
NEM is an international gold producer with operations in Africa, Asia, North America, and South America.
Shares of the miner are dropping quickly today as the price of gold weakens. Should the yellow metal break below $1,200 in coming weeks, NEM has plenty of room to fall.
So here’s what we’ll do…
Buy the NEM November 21, 2014 $24.00 puts for $1.10 or better.
The current bid/ask spread for this contract is $0.98/$1.01.
Do not pay more than $1.10 per contract!
Our official entry price for performance tracking is $1.01. Your price may be higher or lower.
Exit Strategy:
Remember, we want NEM to trade lower. Our first profit target is the May 2014 low at $22.50. If gold really accelerates to the downside in coming weeks, NEM may plummet to our second profit target at $21.00.
The risk control price for this trade is $25.25. If NEM trades above that level, conservative investors should consider closing this trade to preserve capital.
Resource Company #2: Agnico Eagle Mines (AEM)
Here’s another international precious metals producer that’s seeing heavy selling due to today’s gold downturn. AEM has operations in Canada, Latin America, Europe, and the United States.
If gold’s weakness continues, AEM has ample downside potential.
So go ahead and buy the AEM November 21, 2014 $30.00 puts for $1.60 or better.
The current bid/ask spread for this contract is $1.42/$1.48.
Do not pay more than $1.60 per contract!
Our official entry price for performance tracking is $1.48. Your price may be higher or lower.
Exit Strategy:
Remember, we want AEM to trade lower. Our first profit target is the April 2014 low near $28.00. If gold drops significantly below $1,200, AEM may free fall to our second profit target at $24.00.
The risk control price for this trade is $34.00. If AEM trades above that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
