If You Ever Wanted To Own Gold Miners: Here's Your Chance Now

Summary

• Gold miners have become incredibly oversold.
• One example is GDXJ, down by exactly 20% from its top, and trading at an RSI of 22.64.
• Other high quality gold mining names have become abnormally cheap.
• Newmont Mining is down by 17% in the last month alone, and is now trading at just 20 time forward earnings estimates.
• Fundamentals surrounding the gold sector remain sound, and the recent selloff should be treated as a substantial buying opportunity.
• This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Start your free trial today »

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If You Wanted To Own Gold Miners: Here’s Your Chance

The gold mining sector has been battered in recent weeks. VanEck Vectors Junior Gold Miners ETF (GDXJ) is down by exactly 20% from its top, a textbook correction following stellar short-term gains earlier in the year.

Source: StockCharts

To put things into context, GDXJ surged by 35% from its December lows and began its correction in late February.

GDXJ Technicals Tell a Profound Story

GDXJ is trading towards the bottom-end of a multiyear trading range now. Crucial support now is the $28 level, and if the stock falls through we have another area of major support at $26.

However, I don’t expect GDXJ to fail technically here. The fundamentals surrounding gold and gold mining are simply too compelling to ignore at these oversold and discounted levels.

GDXJ appears to have bottomed last September, and that bottom was confirmed by a retest in December. The mid to long-term future image is extremely bright for gold, gold miners and GDXJ. Yet, this ETF is just 7% above its bottom in 2018, clearly something is not right here.

In comparison, tech stocks, discretionary names, communication, materials, industrials, etc. are up by approximately 25-35% off their respective bottoms in December.

Gold miners, especially smaller companies are very volatile. We can see that GDXJ was up by 35% off its bottom far before any other sector. Yet, it was not able to keep those gains, which produced a remarkably convenient 20% correction.

I believe now is a great time to step in to GDXJ, and other names in this sector with high upside potential.

GDXJ Covered Call Dividend Strategy

Right now, you can sell GDXJ’s June 7^th $28.5 call options for $1. GDXJ’s current price is $28.18, so the covered call dividend payment you’ll receive

Analyst’s Disclosure:I am/we are long NEM, GDXJ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article expresses solely my opinions, is produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please consider consulting a professional before putting any capital at risk.