Trouble at 30 Again For Newmont Mining

06/02/03 09:45:56 AM

by Arthur Hill

Despite having trouble again at 30, Newmont (NEM) remains in a long-term uptrend and a continuation higher is expected.

Security: NEM
Position: N/A

Identification of the underlying trend is important to pattern assessment. In downtrends, only bearish continuation patterns and bullish reversals are possible. In uptrends, only bullish continuation patterns and bearish reversals are possible. With this in mind, the list of possible patterns can be narrowed down once the trend has been identified.

By most definitions, NEM is currently in a long-term uptrend. The stock began a series of 52-week highs early last year when it broke above major long-term resistance at 25. In addition, advance occurred on increasing volume and the breakout witnessed a volume surge (gray arrows). Furthermore, the stock is trading above its 104-week SMA (2-year) and the moving average is rising. This moving average marked support three times over the last nine months and continues to hold.

Figure 1: Weekly chart for NEM

Graphic provided by: MetaStock.

With NEM in a long-term uptrend, only bullish continuation patterns and bearish reversals are possible. The stock advanced from 14 to 32.75 and has since consolidated over the last 9-12 months. The consolidation occurred with decreasing volume, which is typical, and looks like a large symmetrical triangle or an ascending triangle. Both are bullish continuation patterns, but the symmetrical triangle can also work as a bearish reversal and is dependent on a subsequent trendline break. The stock broke above the upper trendline, which is bullish, but is still getting resistance around 30.

For the ascending triangle, the stock met resistance around 30 at least three times over the last nine months. Each low is successively higher as buyers came in at higher and higher prices, which shows signs of accumulation. However, the forces of demand are not strong enough to overpower supply just yet. A clean break above resistance at 30 (move to 31) would signal a continuation of the current uptrend and project further strength to around 40.

Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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TECHNICAL ANALYSIS

Trouble at 30 Again For Newmont Mining

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