Chart courtesy of Stockcharts
Today we placed orders to buy PUT Options on IAMGOLD Corporation (IAG: NYSE and IMG: TSX) as this gold producer appears to be overbought at the moment and therefore presents us with an opportunity to profit from a price correction.
We placed two sets of orders for PUTS but were only successful in securing one of them and they were the September 2009 series with a strike price of $10.00 and we paid $0.20 per contract for them, the symbol is IAGUB.
We have another order yet to be filled which is again the September 2009 series but with a strike price of $12.50, they were trading for around $1.16 and our order has a limit on it of $1.00, so we will see what the remainder of the week brings, the symbol is IAGUV.
The chart above shows just how much Iamgold has streaked ahead of the pack when compared with gold and other gold producers. An aberration that should return to the 'norm' hence it stands out as a candidate for a hit and run type of options trade. Should physical gold remain lackluster then we would expect Iamgold to return to the fold shortly.
The chart below shows the rampant progress that Iamgold has made this year however there is now a huge divergence between the stock price and the 200dma which we think should now being to narrow. The relative strength index (RSI) is knocking its head against the '70' level which suggests to us that it is overbought. We would prefer to see it above the '70' level but we cant always wait for the perfect set up. If you think that we have moved too early then please wait a while until the formation is right for you to trade.
IAMGOLD Corporation has a market capitalization of $4.39 billion, a P/E ratio of a whopping 449.25, with 367.31million shares outstanding and an average daily volume of 2.5 million shares traded.
We may appear to preoccupied with the downside of the market at the moment which is true however these windows of opportunity do not last long and a few weeks from now we may well being standing on the other side of the trade and buying Call Options on these very same stocks.
Enjoy the day.
Your thoughts are of course most welcome.
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