Newmont Mining Corp (NEM) — While NEM stock has rallied more than 70% from its mid-January lows, shares appear to have topped. Tuesday’s terror attacks that killed dozens in Brussels should have pushed defensive plays like NEM stock to new highs, but there was a lack of support and shares closed down 1.4% for the day.
When Newmont announced fourth-quarter results on Feb. 17, the world’s second-biggest gold producer reported earnings of 4 cents per share, down 77% from a year ago. It also missed analysts’ estimates of 14 cents by a wide margin. In fact, The Street listed Newmont as one of the “10 S&P 500 Companies With the Biggest 4Q Earnings Misses.”
After the earnings report, S&P Capital IQ Equity Research reiterated its “Hold” rating on NEM stock and lowered its full-year earnings estimate by 15 cents to 65 cents. Its analysts, which consider NEM stock to be high risk, have a 12-month target of $26, which is more than 5% below the current price.
Turning to the chart, NEM stock is trading in an upward trending near-term flag formation with a top at about $27.50 and support at about $25. But longer term, it has formed a double-top at $28, and despite the near-term uptrend, buying volume is lagging and the MACD indicator has issued a sell signal.
The longer-term outlook for Newmont is favorable, but as I mentioned, NEM stock appears to have topped, so traders should consider selling it at the market price. It could also prove to be a profitable short sale for those willing to accept the risk that comes with that strategy.
For those who are, sell NEM stock short at $28 with a downside target of $24 for a potential gain of 14%. A stop-loss order should be entered at $29 to protect against an unexpected move higher and the possibility of theoretically unlimited losses.
