The breakout is above its monthly pivot at $47.91, setting the stage for a momentum runup to its semiannual risky level at $57.02.
Newmont reported revenue of $2.97 billion, up from $2.05 billion in the year-earlier quarter. The Greenwood Village, Colo., company is benefiting from both higher gold prices and increasing production.
In addition, it raised its dividend by 79% to $1 a share.
This profile and the technicals add up to the reason to own Newmont rather than other gold-market investments.
The Weekly Chart for Comex Gold Futures
Courtesy of Refinitiv XENITH
The weekly chart for gold futures is positive, with the contract above its five-week modified moving average at $1,569.70.
It’s also above its 200-week simple moving average, or reversion to the mean, at $1,314.40. The latest portion of the rally began when the contract broke out above this average during the week of Dec. 21, 2018.
The 12x3x3 weekly slow stochastic reading it projected to rise this week to 79.6 from 76.22 on Feb. 14.
The horizontal lines from bottom to top are as follows: The annual value level is $1,079.70. The quarterly value level is $1,425.90. The semiannual pivot is $1,610.70. The monthly risky level for February is $1,697.57.
At Wednesday’s close of $1,615.70 the contract was up 6.1% year to date and in bull-market territory up 38% from its August 2018 low.
Trading Strategy: Traders should reduce holdings on strength to its monthly risky level at $1,697.57. Add to positions on weakness to its semiannual pivot at $1,610.70.
The Weekly Chart for Newmont
Courtesy of Refinitiv XENITH
The weekly chart for Newmont is positive but overbought, with the stock above its five-week modified moving average of $44.22.
The stock has been climbing from its 200-week simple moving average, or reversion to the mean, at $35.82. The stock has been above this average since the week of Aug. 31, 2018, when the average was $30.12.
The 12x3x3 weekly slow stochastic reading is projected to slip this week to 87.15 from 88.25 on Feb. 14.
At its lows in September 2018 the weekly slow stochastic reading was 7.31. A reading below 10 indicates that the stock was too cheap to ignore, which is a buy signal.
The horizontal lines are the quarterly value level at $38.14, the monthly pivot at $47.91 and the semiannual risky level at $57.02.
At Wednesday’s close of $46.17 the stock is up 6.3% year to date and in bull-market territory 55% above its 52-week low of $29.77, set during the week of May 10, 2019.
Trading Strategy: Holding its monthly pivot at $47.91 targets its semiannual risky level at $57.02, where investors should reduce holdings. Given a correction, buy weakness to its quarterly risky level at $38.14.
How to use my value levels and risky levels:
The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Quarterly, semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.
Monthly levels for February were established based on the Jan. 31 closes.
New weekly levels are calculated after the end of each week.
New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.
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.
How to use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the past 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.
A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.
A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.