Buy Newmont Goldcorp (NEM - Get Report) as a hedge against a vulnerable (as in downside volatility) stock market. With gold bottoming my call is to buy Newmont up to its 200-day SMA at $32.37. Comex gold futures are above their 200-day simple moving average at $1,255.8 and I expect Newmont to catch up.

Newmont is not cheap as its P/E ratio is 22.68 with a dividend yield of 1.87%, according to Macrotrends. The gold miner has beaten earnings-per-share estimates five consecutive quarters, but the stock has been weak since reporting earnings on April 25. The stock is down 9.1% year to date and in bear market territory 22.9% below its May 14, 2018 intraday high of $39.84.

The stock set its 2019 high of $36.71 on Feb. 22 on a positive reaction to earnings, but weakness followed as stocks surged. The stock opened higher following earnings on April 25, but again the stock market was strong, and a safety investment did not seem appropriate.

Stock market weakness as May began helped Newmont rebound from a low of $29.82 on May 6. The stock is 8.3% above this low. An investment in Newmont includes Goldcorp through a recent acquisition in a $10 billion merger, which makes the combo the world's largest gold miner.

Owning gold or gold mining stocks have always been considered a "just in case" asset that goes back to the Great Depression when gold miner Homestake Mining rallied significantly as the stock market crashed. I have been advocating a 5% to 10% stake in gold miners and I favor Newmont Goldcorp.

The Daily Chart for Comex Gold Futures

Courtesy of Refinitiv XENITH

The daily chart for gold futures shows that gold is above a "golden cross" that was confirmed on Jan. 22 when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. Gold futures are above its 200-day SMA at $1,255.8 and below its 50-day SMA at $1,294.3. The close of $1,281.3 on Dec. 31 was the input to my proprietary analytics. A semiannual pivot is $1,277.8 with an annual value level at $1,180.8. The close of $1,298.5 on March 29 was an input to my analytics and a quarterly pivot is $1,301.0. The April 30 close of $1,285.7 was an input and a monthly risky level for May is $1,333.1.

The Weekly Chart for Comex Gold Futures

Courtesy of Refinitiv XENITH

The weekly chart for gold is negative with the futures contract below its five-week modified moving average of $1,290.2. The contract has been above its 200-week simple moving average or "reversion to the mean" since the week of Dec. 14 with the average now at $1,246.3. The 12x3x3 weekly slow stochastic reading is projected to slip to 23.70 this week down from 24.84 on May 3. A weekly close above the five-week MMA with a rising stochastic reading would be positive.

Trading Strategy: Buy weakness to the semiannual pivot at $1,277.8 and to the 200-day SMA at $1,255.8 and the 200-week SMA at $1,246,3. Reduce holdings on strength to the monthly risky level at $1,333.10. A quarterly pivot remains at $1,301.0.

The Daily Chart for Newmont Goldcorp

Courtesy of Refinitiv XENITH

The daily chart for Newmont shows the stock below its 200-day simple moving average at $32.36. 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 a 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 a quarterly risky level remains at $37.35. The close of $31.06 on April 30 was an input to my analytics and a monthly risky level for May is $33.85.

The Weekly Chart for Newmont Goldcorp

Courtesy of Refinitiv XENITH

The weekly chart for Newmont is negative, with the stock below its five-week modified moving average of $32.34. The stock has been climbing its 200-week simple moving average or "reversion to the mean" since the week of Aug. 31 with the average now at $131.88 with the stock now below it. The 12x3x3 weekly slow stochastic reading is projected to slip to 29.33 this week down from 40.90 on May 3. A weekly close above the five-week MMA with a rising stochastic reading would be positive.

Trading Strategy: Buy Newmont up to its 200-day SMA at $32.37 as the stock follows gold futures higher. Reduce holdings on strength to the monthly and quarterly risky levels at $33.85 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 January, February, March and April. 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.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.