Digging for Gold Among Mining Stocks

Many of the gold mining stocks that short-term traders and active investors had become accustomed to trading have slipped into bear market territory with the latest correction. While exchange-traded funds representing these stocks as a whole – ETFs like the Market Vectors Gold Miners ETF (NYSE: GDX) and the Market Vectors Junior Gold Miners ETF (NASDAQ: GDXJ) – have been in bear market territory for many months, individual gold mining stocks like Newmont Mining (NYSE: NEM) and Royal Gold (NASDAQ: RGLD) are only recently trading below their 200-day moving averages.

The problem with this is that many traders have a discipline that prevents them from buying stocks and ETFs once they have closed below the 200-day moving average. Fortunately, while this does take many gold miners off the table – and with them both of the major gold mining stock ETFs – there are a few gold mining stocks pulling back above the 200-day moving average that short-term traders and active investors may be able to take advantage of over the next few days.

Down nearly 5% in trading on Wednesday after closing lower for three days in a row, shares of Yamana Gold (NYSE: AUY) are back in oversold territory above the 200-day moving average. The current sell-off in the stock comes in the wake of a rally to new, 52-week highs reached at the end of February. In the first leg down, shares of AUY finished lower for four out of five trading days before a two-day rally sent the stock higher by more than four and a half percent.

Heading into Thursday’s open, AUY has a positive edge of more than two and a quarter percent, and neutral ratings of 7 out of 10.

With a positive edge of more than one and a quarter percent, shares of Randgold Resources Ltd. (NASDAQ: GOLD) are also trading oversold in bull market territory. GOLD has finished lower for three in a row, pulling back by three and a half percent in Wednesday’s session, and is now at new, two-week closing lows. Like Yamana Gold, Randgold was trading in oversold territory as recently as last week, part of the same sell-off that led to rallies in Yamana, Randgold and other gold stocks.

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David Penn is Editor in Chief of TradingMarkets.com