The Professor was one of the first to get Bullish commodities right before their historical breakout. He now thinks that GOLD is primed for a breakout. The technicals have lined up, and the Professor Mike Parks has pulled the trigger.
Gold is usually a flight to safety trade. When there is geopolitical instability, the price of gold usually spikes. We saw this when Russia invaded Ukraine with the price of gold breaking out and testing all-time highs. It has since pulled back and consolidated and looks like it could be set for another leg higher.
The Fed
When the Fed prints a lot of money, usually the price of gold goes up. Historically, gold has been an inflation hedge, as we saw post-2001 and post 2008. This time around, post-Covid, a lot of the money hedging inflation went into Bitcoin, but when war broke out, Gold showed itself to be the true flight to safety trade.
With Gold prices consolidating at higher levels and possibly set to break out even higher to all-time highs, this is great news for Gold miners as they will receive higher prices for the product they sell, all else being equal. The Professor has Identified an amazing looking chart and stock that looks poised to break out even higher! That stock is Barrick Gold Corporation (GOLD).
Fundamentals
Barrick Gold Corporation (GOLD) engages in the exploration, mine development, production, and sale of gold and copper properties. It has ownership interests in producing gold mines that are located in Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, Dominican Republic, Mali, Tanzania, and the United States.
Technicals
Here is what the Professor thinks about the Technical setup in GOLD:
GOLD
GOLD is making an Ascending Triangle / Bull Flag at the top of the trading range, and looking to break out above the upper resistance at any moment.
At this point, I’m thinking that buyers are going to continue to step in and push the stock back towards the pivot highs.
And playing breakout trades with call options is a fine strategy, but since I want to limit some of my downside risk, I am ok with spreading it out (selling calls against my long calls).
In other words, I am trading a Bull Call Spread instead of Long Calls for the breakout to the upside in order to limit my downside exposure, but also limit my potential gains.
My Trade : 20 May 22 $26/27 Call @ $0.23
As you can see in the image above, I am trading the 20 May 22 26/27 Call spread for $0.23 looking to make a max profit of $0.77.
Key Take-Away:
By trading a call spread, I am limiting my potential return but also controlling my risk. Options allow me to trade stocks for a fraction of the cost of buying the stock outright due to the inherent leverage in options contracts. By using a spread, I reduce the cost of my trade than buying calls outright but also give up potential upside. As a trader, I usually like to have pre-defined risk/reward parameters on most of my trades, options allow me to do this. It may sound funny but options contracts do in fact give me more options!
