Is Newmont Mining Corp (NEM) on the Way to New Highs?

Newmont Mining Corp (NEM) is soaring along with gold after this morning's disappointing jobs report diminished June rate-hike expectations

by Kirra Fedyszyn

Published on Jun 3, 2016 at 11:04 AM
Updated on Jun 24, 2020 at 10:16 AM

Newmont Mining Corp (NYSE:NEM) is surging 8.8% to sit at $35.21 today -- not far off of its three-year high of $35.75, seen in mid-May -- as gold prices soar in the wake of diminished June rate-hike expectations following an ugly jobs report. In fact, NEM has been a serious outperformer for months, but bearish sentiment still runs high, leaving the stock with plenty of potential gas in the tank.

NEM has added an impressive 95.7% in 2016 alone, and even before today's surge had outperformed the S&P 500 Index (SPX) by about 17 percentage points over the past three months. And the stock's most recent pullback was quickly contained by its 40-day moving average -- a trendline that has provided solid support for the shares throughout this year's big rally.

NEM Daily Chart June 3

Despite this show of strength on the charts, however, analysts have been slow to raise their outlooks for NEM. At the moment, eight of the 13 brokerage firms providing coverage still rate the security a lukewarm "hold." And the average 12-month price target of $35.06 now sits just underfoot.

Options traders are still more put-skewed than usual. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NEM's 50-day put/call volume ratio of 1.31 is seated above 94% of all reading in the past year. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.14 is just 6 percentage points from a 12-month high.

NEM options are hot today as the stock soars, and puts are still popular, crossing the tape at three times their average intraday rate. In fact, put open interest now sits in the 83rd annual percentile.

Should the prevailing bearish sentiment begin to unwind in light of NEM's continued outperformance, the shares could see significant tailwinds. Furthermore, the same case can be made for gold in general, a sector still steeped in pessimism as prices continue to rise. A capitulation of gold bears in the wake of shifting Fed expectations could help keep the rally going, and, generally speaking, what's good for gold is good for Newmont Mining Corp (NYSE:NEM).

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