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Newmont Mining (NEM) – All Signs Point Lower

Resistance at 50% of a previous upswing and a head and shoulders pattern are bearish for NEM


While most stocks are nicely in the positive column for 2013, some of the gold mining names have faced stiff headwinds as of late.  And for all of the attention being paid to the price of gold itself, the charts of at least some of the larger gold miner stocks actually look much juicier for trade setups.

One stock that particularly caught my attention is Newmont Mining Corp. (NYSE:NEM), as it seemingly hangs above a cliff.  The stock’s chart looking back to 2009 quickly reveals much of the current circumstances.

After a rapid rise off the 2009 lows along with the broader stock market and risk assets in general, the stock developed a dramatic top in late 2011, one which remains the basis for potentially lower prices still going forward.

After bouncing hard off an area near $43 in early 2010, the stock again found this zone of support in 2012 and also so far in 2013.  What’s concerning for those long the stock at this stage is this continued testing of the $43 mark because the more often a level is tested the weaker it gets as a level or support or resistance.

Closer up on the charts, two technically important events are placing weight on the stock, making it difficult at this stage to see a turn back up on the charts.

First, measured from the 2011 top down to the lows in May 2012, the stock then retraced exactly 50% of this swing and found resistance.  Such a pattern most often leads to at least a test of prices below the swing lows.

Second and somewhat closer-up, the stock also currently sits at the neckline of a head and shoulders pattern that ultimately should resolve lower.  The top of the head and shoulders pattern is the 50% retracement of the swing discussed above, which gives it further credibility to move the price of NEM lower.

Taking it all together the stock stands a good chance of slipping towards the mid $30s over the coming 2 months or so.

And just for comparison, while the chart of Barrick Gold Corp (NYSE:ABX) too looks weak, it lacks a confluence zone of support that sets the stock price of Newmont Mining Corp up so nicely to the short side once it breaks below.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.

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