Newmont Mining Corp. (NYSE: NEM)

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company’s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, and Mexico. As of December 31, 2011, it had proven and probable gold reserves of approximately 98.8 million ounces and an aggregate land position of approximately 31,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Please take a look at the 1-year chart of NEM (Newmont Mining Corporation) below with my added notations:

1-year chart of NEM (Newmont Mining Corporation)

NEM sold off from November of last year until May of this year. After hitting that low, the stock formed what a double bottom (blue) price pattern. The pattern is as simple as it sounds: Bottoming, rallying up to a point, selling back off to a similar bottom, and then rallying back up again.

As with any price pattern, a confirmation of the pattern is needed. NEM confirmed the pattern by breaking up through the $52.50 resistance (red), which had also been a brief support in March. The expectation would be for the previous $52.50 resistance to now act as support on any pullbacks before the stock moves higher.

The Tale of the Tape: NEM confirmed a double bottom price pattern. A long trade could be entered on a pullback down to the $52.50 support with a stop placed under that level. A break back below $52.50 would negate the forecast for a move higher.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT