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Perhaps I was a bit too hasty in mocking bears for their impotence in yesterday’s Beat the Bell. It turns out they just needed some time to sharpen their swords before striking. And strike they have, with fury. Thursday was a veritable bloodbath with risk assets across the board finally receiving their comeuppance. The weak hands abandoning equities found refuge in a variety of places, but it’s gold stocks that deserve our attention today. The Market Vectors Gold Miners ETF (NYSEARCA:GDX
Click to Enlarge Source: OptionsAnalytix
Notice how Thursday’s high volume rally carried the fund above the upper trendline of the pattern. That right there looks like a breakout. And it may well signal the path of least resistance for gold stocks is now higher.
Trade Gold Stocks With GDX’s implied volatility scraping the bottom of the barrel, options for gold stocks can be purchased on the cheap. If you want to position for more upside, then buy the Oct $23 calls for $1.20. The risk is limited to the initial cost of $1.20 and it will be forfeited if GDX sits below $23 at expiration.
The max reward is unlimited, so pull out the pom-poms and root for some serious follow through. $24 is the next potential resistance zone so consider that your first target.
As of this writing, Tyler Craig held neutral option positions on GDX and bearish positions on TLT. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
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