3 Charts That Suggest Gold Miners Are Headed Lower

3 Charts That Suggest Gold Miners Are Headed Lower

Investors with exposure to gold miners had much to cheer about in the early days of 2017, but upward momentum across the industry seemed to stall out in early spring. Based on the charts of several dominant miners, it appears as though the bears have taken control of the trend, and there does not seem to be much to suggest that the downward momentum is going to reverse any time soon. (For more, see: Does It Still Pay to Invest in Gold?)


Barrick Gold Corporation (ABX)


When it comes to gold mining, there are few companies with the scale of Barrick Gold. The company is a favorite among fundamental investors and active traders, and it has a market cap of $17.5 billion, so it is a good barometer for the entire segment. On the chart below, you can see that the price has been trading within a descending channel since the break below the 200-day moving average (red line). Active traders will use these trendlines to determine the placement of their orders, and recent price action suggests that the bias to the downside will likely continue. As confirmation of a move lower, the bears will also look to the crossover between the 50-day and 200-day moving averages as a signal that the long-term downtrend could just be getting under way. From a risk management perspective, buy stop orders will likely be placed above $17 in case of a sudden shift in fundamentals. (See also: Gold Faces Major Resistance.)



Goldcorp Inc. (GG)


Another prominent gold miner that is trading within a defined channel pattern is Goldcorp. Taking a look at the chart below, you'll notice that traders have been using these guides for placing sell orders near the upper trendline and buy orders near the support of the lower one. Since the price is clearly below the major 200-day moving average, the bias of traders is lower, and most will likely look to enter their orders as close to the resistance levels as possible in order to maximize their risk/reward. From a technical analysis standpoint, it is interesting to note how the price and the 50-day moving average were prevented from heading higher earlier in 2017. This strong level of resistance will likely be used for placement of stop-loss orders, and many bulls will likely choose to remain on the sidelines until they see several consecutive closes above this level. (For further reading, check out: 4 ETFs for Trading Gold's Falling Prices.)



Newmont Mining Corporation (NEM)


Another gold miner that is trading near major resistance is Newmont Mining. On the chart below, it is apparent that the bulls have their work cut out for them if they want to take control of the momentum. The sideways price action over the past year, proximity to the 200-day moving average and clear resistance from the dotted trendline makes this a clear target for the bears. (For more, see: Earnings Cold Sink Gold Miners.)



The Bottom Line


Investors interested in the gold miners haven't had much to cheer about since prices stalled out in March/April. Based on the charts discussed above, key gold miners are trading within confined ranges below the 200-day moving average, which suggests that the bears are in control of the long-term momentum. The defined resistance levels are now creating interesting selling opportunities, and from a risk/reward perspective, many bulls will likely want to remain on the sidelines until the price is able to make several consecutive closes above the mentioned resistance. (For more, see: 3 Charts That Suggest Commodities Are Headed Lower.)


Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the companies mentioned.