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This morning, I am recommending a bullish trade on Newmont Goldcorp Corporation (NYSE:NEM), the gold, copper, silver, zinc and lead producer.
My indicators are giving bullish to neutral readings, a mild downgrade from last week’s bullish readings. Even with the S&P 500 breaking to new all-time highs, my indicators are not giving the screaming buy signals you might expect.
One of the reasons behind this week’s rally is that it looks like the Federal Open Market Committee (FOMC) will decrease the target range for the federal funds rate by 25 basis points (0.25%). It’s possible that we could see a 50 basis point (0.50%) rate cut, but I think that’s less likely.
The U.S. economy is very strong, so a rate cut doesn’t seem necessary, but the FOMC may be concerned about weakness in the rest of the world’s economies. Regardless of the reason, the FOMC seems to be doing what it can to push the market higher, and I do not want to buck the Fed.
If we want to take a bullish trader this week, I would suggest looking to the precious metals.
Silver and Gold
I’m still bullish on the metals, especially silver, which has not caught up to the rally in gold. I expect actually silver to outperform gold over the longer term.
Daily Chart of Gold/Silver Ratio — Chart Source: TradingView
As you can see in the chart above, the ratio of gold to silver prices remains near an all-time high. This is unusual from a historical perspective, and I think that it will correct itself as silver prices catch up to the rally in gold.
NEM is primarily a gold miner, but it has exposure to silver through some of its North American operations. Plus, as I mentioned in late June, investors are pushing into gold. Gold is still above $1,400 per ounce, and NEM is a good way to take advantage.
NEM Set a New 52-Week High
Looking at the daily chart, we can see NEM gapped higher in late June, right around the time gold prices jumped. Since then, NEM has established support around $37.50, and it doesn’t show any signs of slowing down.
Daily Chart of Newmont Goldcorp Corporation (NEM) — Chart Source: TradingView
In the past few days, NEM broke above resistance at just under $39, and it set a new 52-week high. I think it could push toward $40 in the short term. As long as precious metals are bullish, NEM will keep rising, and I think a bullish call option is the perfect way to play this stock.
Buy to open the Newmont Goldcorp Corporation (NEM) Sept. 20th $41.12 Calls (NEM190920C00041120) at $1.00 or lower.
InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.