Overbought Stocks Can Provide Investors With Valuable Clues: A Once In A Decade Opportunity In A Senior Gold Producer
Many investors become fearful when a stock they own rises 'too much', but sometimes the most valuable clues can be revealed when stocks reach overbought conditions.
As market analysts, we want to maintain a keen eye on stocks that exhibit notable shifts in character. By this, I mean paying close attention to stocks that suddenly transition from bearish or sideways price behavior to decidedly bullish action with strong buying pressure.
Likewise, we should make particular note of stocks that once rose week after week, only to succumb to heavy selling pressure and enter a pattern of consistent declines.
Ideally, we want to recognize these transitions early, when the potential to profit from a new trend taking hold is still substantial.
To keep this post clear and succinct, I will focus on just one stock. Barrick Mining (NYSE: GOLD, TSX: ABX) has long been a laggard in the gold mining sector. In fact, from early 2023 to early 2025 (12/31/2022 to 12/31/2024), during a period when gold rallied by roughly $1,000 per ounce, Barrick shares actually traded lower!
Barrick Mining (August 2022 - March 2025)
Years of share price underperformance generated extremely negative investor sentiment toward Barrick. As recently as May of this year, it seemed as though Barrick couldn’t do anything right—cost overruns in Nevada, mines seized in Mali, and disputes with hostile host countries such as Tanzania and Papua New Guinea. You name it, Barrick appeared to have a never-ending string of problems that disappointed shareholders.
Yet Barrick remains the world’s second-largest gold producer, with roughly 4,000,000 ounces of annual gold production at a time when gold prices are trading at all-time highs above US$3,000 per ounce.
Investor negativity towards Barrick may have reached a capitulation washout stage earlier this year when the company had its Mali gold mine seized (Loulo‑Gounkoto complex) and subsequently changed its stock symbol on the NYSE from ‘GOLD’ to ‘B’.
Earlier this month, CIBC upgraded Barrick to Outperform while raising its price target to US$30 per share. The upgrade was based on several factors:
Robust Q2 results driven by production growth in both gold and copper.
Lower costs and strong margins (US$1,600 per ounce AISC profit margin).
A surge in cash flow, dividends, and share repurchases.
Increasing confidence that Barrick will achieve its full-year guidance while keeping costs under control (US$1,684 AISC reported last quarter).
Importantly, Barrick has a strong growth pipeline looking out four to five years, underpinned by the following projects:
Ramp-up at Goldrush (Nevada Gold Mines)
Lumwana Superpit Expansion (Zambia)
Reko Diq (Pakistan) — an open-pit porphyry copper mine expected to commence production in 2028
Fourmile (100% Barrick, Nevada) — a tier-one asset with an updated resource estimate expected later this year
Markets are forward-looking, and there is potential for investors to begin factoring in Phase One production at Reko Diq as early as 2026. The same could hold true for Fourmile, as Barrick is positioned to deliver what could be a jaw-dropping updated resource estimate later this year.
Meanwhile, Barrick shares have already delivered a phenomenal ~25% gain in August.
Barrick Mining (Daily)
$46 billion market cap stocks like Barrick only become technically ‘overbought’ for one primary reason: Large institutional investors are accumulating, and they begin competing with one another to scoop up more and more shares. The footprints of professional investors are all over the above chart, and it is this accumulation by professional investors that has sent Barrick shares from $22 to nearly $27 in August.
The above chart is instructive for a number of reasons:
The June/July sideways consolidation occurred on lighter trading volume, and resolved by way of a ‘gap & go’ bullish trading session on August 4th.
During the August rally, Barrick shares have had 3 down days, but there have not been consecutive red trading sessions (evidence of bullish buying pressure).
The Barrick share price has risen 7 of the last 8 trading sessions, with a daily-RSI(14) above 70 as the share price rose more than 10%.
When we zoom out and examine Barrick’s chart on longer time frames, it becomes clear just how much potential upside exists after so many years of mediocrity and underperformance. In fact, I don’t think it’s unreasonable to consider the possibility that Barrick shares could double over the next 24 months.
The incredible buying pressure and strong outperformance in Barrick shares during August is sending an important—and potentially valuable—signal to investors who are paying attention. We want to identify bullish stocks that are just beginning to enter nascent uptrends from multi-year (or even multi-decade) basing patterns.
In this case, an overbought condition is actually a positive sign for Barrick bulls who recognize the longer-term upside potential.
Disclosure: Author owns Barrick shares at the time of publishing and may choose to buy or sell at any time without notice.
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