Newmont Mining Corporation, together with its subsidiaries, acquires, explores for, and produces gold, copper, and silver deposits. The company’s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, Mexico, and Suriname. As of December 31, 2013, it had proven and probable gold reserves of approximately 88.4 million ounces and an aggregate land position of approximately 24,000 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.
Take a look at the 1-year chart of Newmont (NYSE: NEM) below with added notations:
After a steep decline in September and October, NEM has been trading sideways since its November low. All the while, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.
NEM’s rectangle pattern had formed a $20 resistance (green) and an $18 support (blue). At some point the stock had to break one of the two levels, and earlier this week NEM broke the $20 resistance.
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The Tale of the Tape: NEM broke out of its rectangle pattern. The possible long position on the stock would be on a pullback to $20. The ideal short opportunity would be on a break below $20 with an expectation of a fall down to the $18 level.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach