It can be challenging to know what trade to make and when to make it, but there are those trading opportunities that are clear and somewhat obvious. Usually, the “keep it simple stupid” trades tend to be the best anyway. Keep in mind that regardless of simple or not, that doesn’t necessarily mean the trade will always work out in your favor. One stock that appears to have a “simple” trading opportunity would be that of Aurico Gold, Inc.
AuRico Gold is a mining company, which also engages in the exploration for, and development of, gold and silver deposits in Mexico. Through its subsidiaries, Aurico owns and operates the Ocampo gold-silver mine in Chihuahua State, Mexico, and the El Cubo gold-silver mine in Guanajuato State, Mexico, both of which are producing gold and silver. Through its subsidiaries, Aurico also owns the Guadalupe y Calvo gold-silver exploration project in Chihuahua State, Mexico, and leases the Las Torres gold-silver mine in Guanajuato State, Mexico, which is also producing gold and silver.
Before discussing potential trading opportunities, please take a look at the 1-year chart of AUQ (Aurico Gold, Inc.) below with my added notations:
Pretty straightforward trade, isn’t it? AUQ has been holding a very important level of support in the area of $9 (navy) for the last 8 months. No matter what the market has or has not done this year, AUQ has not broken below that general area of support. If the market should move lower, ACTG will most likely retest its support level for a potential trade. On any rallies, do not forget about the $11 level (purple) as a potential resistance.
The Tale of the Tape: AUQ has held a very important support level at $9 since May. If the stock were to approach that level again, a trader could enter a long position with a stop under that level. If AUQ were to break that support, a short position could be made with a stop above the $9 level.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT