My Favorite Way to Play Gold's 20% Upside Potential

Gold is trading higher by about 15% year to date; a global pandemic and widespread economic destruction will tend to drive investors toward the safe havens.

With no end date on COVID-19 and the increasing likelihood of a lurch down to March lows, there's plenty of headroom for more gold gains.

And that makes right now the perfect time to make this smart move.

For the past month or so, the resurgent bull market has helped push the yellow metal into consolidation mode, trading between $1,700 and $1,775.

Now to the average investor, that's not terribly exciting. It's a little flat. But on the charts, $1,700 is absolutely electrifying.

See, $1,700 is a technical floor, or a "launch pad" from which gold can rocket higher - 15% or even 20% from here, I expect.

So yes, this is the right time to own gold. But you don't have to be content with those profits alone.

Make sure you're holding these gold shares before gold moves another cent higher...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

The Technical Picture and Recent Moves Look Beautiful

So we've got a nice gold floor shaping up. But even more, that back-and-forth motion means the precious metal is starting to wiggle out of the "overbought" situation that slowed its rise in early April, kind of like you'd get yourself out of quicksand.

There are a plenty of mining stocks that have been active in the rally, just like you might expect; my Night Trader subscribers got the chance to take some quick gains on Barrick Gold Corp. (NYSE: GOLD) just a few weeks ago. The position gained 31.54% in just eight sessions, nearly 13 times better than the S&P 500 and more than 27 times better than the physical metal the company pulls out of the ground.

That's powerful performance, but I'm here to tell you: The hunting is still good.

There are a few breakout companies poised to play catch-up. This is where all the opportunities are in the short term.

The Gold Stock at the Top of a Very Short List

There's a small-cap, $1.59 billion miner sitting square in the middle of my sights here: Eldorado Gold Corp. (NYSE: EGO).

And here again, the technical picture tells the story. Look at that beautiful green 20-day moving average (MA20).

If you've been following me here or on Markets Live, or if you're playing my Night Trader trading research, you know I call the MA20 the "trader's trend line." It gives you a more nuanced view than any other moving average, particularly in volatile, choppy markets like this. This stock is above its MA20 right now, and for the foreseeable future, there's no looking back.

It's one of very few miners that remains undervalued over the past 30 days of this renewed gold bull.

It's spent the last month getting comfortable, making itself at home, and consolidating above the $9 level.

But Eldorado is moving on soon. It's building momentum at that level, getting ready to move to $11 or so over the next few weeks.

That would represent a 16.77% leap from the company's current share price - the perfect complement to the big profits you'll see from owning the metal itself.

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About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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