Right on the heel of my oil short loss, I am taking another stab at shorting the market. This one is Barrick Gold (ABX.TO). I am moving away from shorting financials because the puts premium are almost doubled that of the calls! It seems that too many people are betting the banks will take a hit in the next fall. In the long term, ABX.TO appears to be in an up trend. However, the intermediate trend is turning negative as shown in Figure 1. \$45 is an obvious resistance for ABX.TO. Even with today's positive market moves, ABX.TO fail to catch on the bullish wave and only touched \$44.86 in the morning optimism (Figure 2). Who knows, perhaps it might break it sooner than later. But the reward/risk is decent to short ABX.TO seeing that the \$45 resistance is right above.
[caption id="" align="aligncenter" width="570" caption="Barrick Gold (ABX.TO)"][/caption]
I will give it a month's time to move below \$44.00. Worst case stop loss is \$2.50 on the premium. That is (\$2.50 - \$4.00) x 100 x 3 = -\$450 - \$12.95 x 2 = \$475.90 = 5% of account total. My mental stop is \$3.00 on the premium. Which is about 3.3% of my account total.
[caption id="" align="aligncenter" width="570" caption="ABX.TO intraday"]1[/caption]