In mid June we showed this chart of Randgold Resources Limited (GOLD) and commented that the yawning gap between the stock price and the 200dma suggests that this aberration cannot remain as is and either the average has to move up or the stock price has to move down in order to return to the ‘norm’. A correction of around $10.00 was anticipated and so we purchased PUT Options on Randgold which is now history.
Fast forwarding to today we can see that Randgold has come some way to correcting this aberration as the stock price is now only about $7.00 higher than the 200dma whereas before it was about $28.00 higher as the 200dma stood at $44.00 and the stock price at $72.00.
So the question is: Is it a buy yet?
Well, we have conflicting signals as the trend is still down from the June peak but the MACD is showing a golden crossover and it is in oversold territory so there is still plenty of space above for it to rise a little further. We had hoped that the stock price would indeed take tea with the 200dma and then bounce off it and put in a rally. However we cant always expect to get a perfect set up every time which would provide us with a reasonable level of confidence to make a purchase.
On balance we think that this may be as good as it gets for Randgold and that a purchase here would prove to be a profitable one, however we are looking for an absolute bargain and have chosen to wait a little longer. This decision is not unanimous within our team so as always the final decision is yours and yours alone to make.
If we do decide to make a move either with a purchase of the stock or an options trade we will of course let you know immediately. If you decide to go ahead now then please let us know how you get on.
Randgold Resources Limited trades on the NASDAQ under the symbol of GOLD and on the London Stock Exchange under the symbol of RRS.
Have a sparkling day.
Your thoughts are of course most welcome.
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