Markets PaPer

Buy Newmont Goldcorp to Follow Gold Futures Higher

Newmont Goldcorp Corp (NEM) should be a core holding in a diversified investment portfolio. My call is to allocate 10% of your investment portfolio into a gold mining stock and Newmont is closely correlated to the price pattern for the Comex gold futures contract.

The weekly chart for gold futures shows that the precious metal is poised for a breakout and Newmont will follow. Given recent volatility in the stock market a 10% allocation to the largest gold miner is a prudent choice.

Here’s the Weekly Chart for gold futures

Courtesy of Refinitiv XENITH

The weekly chart for Comex gold is positive with the contract above its five-week modified moving average at $1,303.4. The contract has been above its 200-week simple moving average or “reversion to the mean” since the week of Dec. 7 with the average now at $1,250.4. Note that this “reversion to the mean” has been a magnet going back to the week of June 17, 2016 when a trading range began. The gold futures contract set its 2019 high this week at $1,352.7. The 12x3x3 weekly slow stochastic reading is projected to rise to 40.73 this week up from 27.60 on May 31.

Trading Strategy: The annual value level is $1,180.8 with the semiannual pivot at $1,277.8 which held since January as a buy level. The contract moved above its second-quarter pivot at 1,300.9 setting the stage for strength to its risky level for June at $1,373.2.

Newmont is not cheap as its P/E ratio is 26.13 with a dividend yield of 1.62%, according to Macrotrends. The gold miner has beaten earnings-per-share estimates five consecutive quarters.

Back on May 8 I recommended that investors buy the stock up to its 200-day simple moving average, then at $32.37. Investors could have accumulated that stock down to $29.77 on May 10. Gold strengthened this week despite the strong stock market on concerns about the trade wars with China and Mexico.

The Daily Chart for Newmont Goldcorp

Courtesy of Refinitiv XENITH

The daily chart for Newmont shows the stock popped above its 200-day simple moving average at $32.10 on May 31. The price gap lower on Jan. 14 was caused by the purchase of Goldcorp. The Dec. 31 close of $34.65 was input to my proprietary analytics and its semiannual risky level remains above the chart at $44.75. The close of $34.90 on March 29 was an input to my analytics and its second quarter risky level remains at $37.35. The close of $33.09 on May 31 was an input to my analytics and its monthly risky level for June is $35.92.

The Weekly Chart for Newmont Goldcorp

Courtesy of Refinitiv XENITH

The weekly chart for Newmont is positive with the stock above its five-week modified moving average of $32.18. The stock has been climbing its 200-week simple moving average or “reversion to the mean” since the week of Aug. 31, 2018 with the average now at $32.18 as a strong support. The 12x3x3 weekly slow stochastic reading is projected to rise to 37.92 this week up from 26.30 on May 31.

Trading Strategy: Buy Newmont on weakness to its 200-week SMA at $32.18 and reduce holdings on strength to the semiannual risky level at $44.74 which is shown at the top of the weekly chart. This upside would be signaled by a breakout above its monthly and quarterly risky levels at $35.92 and $37.35, respectively.

How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of Jan., Feb., March, April and May. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

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