Gold Stocks at New Lows

09/16/2015 9:00 am EST


Gold’s negative price action has spread throughout the sector, explains Karee Venema, technical and fundamental analyst with Schaeffer Investment Research.

Commodity stocks Barrick Gold Corporation (ABX), Yamana Gold (AUY), and Eldorado Gold (EGO) have all tumbled to fresh lows.

Barrick, for example, tagged $6.23 earlier—its lowest mark since October 1989—but was last seen down 3.4% at $6.26.

Longer-term, the shares have surrendered roughly two-thirds of their value over the past 52 weeks and have encountered increased pressure from their 32-day moving average since mid-May.

Option traders have kept the faith, though. Barrick's 10-day call/put volume ratio of 19.77 ranks in the 96th annual percentile, meaning calls have been bought to open over puts at a near-annual-high clip. An unwinding of these bullish bets could pressure the shares even lower.

Yamana, meanwhile, is down 2.1% at $1.67 and fresh off an 11-year low of $1.66.  This is just more of the same for a stock that's down 58.5% year-to-date.

Its most recent rally attempt was swiftly rejected by its descending 10-week moving average.

There are pockets of optimism levied toward this chronic underperformer, as well, which could translate into additional headwinds down the road.

Specifically, 60% of analysts maintain a buy or strong buy recommendation toward Yamana Gold, while the average 12-month price target of $5.10 rests in territory not seen since last October.

Simply stated, the door is wide open for a round of downgrades and/or price-target cuts.

Eldorado notched a new six-year low of $2.70 earlier, but was more recently trading 2% lower at $2.71. The stock has been struggling for some time, though, and is currently staring at a 55% year-to-date deficit.

What's more, a mid-August rebound was contained by the equity's 80-day moving average, a trend line that's ushered EGO lower for most of the year.

Short sellers have recently started upping the bearish ante on this broad-market laggard.

Specifically, short interest jumped 16.4% in the last two reporting periods, but still only accounts for less than 1% of Eldorado Gold Corp's available float.

The stock could face a fresh wave of selling pressure, should shorts continue to increase their exposure.

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