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FLAGS AND PENNANTS


A Pair Of Flags For Newmont

06/18/08 09:32:03 AM
by Arthur Hill

Newmont Mining has falling flags working on two time frames, and a breakout on the daily chart would have long-term implications.

Security:   NEM
Position:   Accumulate

Bull flags form after an advance and typically slant down. As such, they represent a correction after the advance. A break above the upper trendline triggers the first signal. A move above the closest reaction high completes the breakout. Once confirmed, a move similar to the first advance is expected.

FIGURE 1: NEM, WEEKLY. NEM advanced above 50 and then corrected with a falling flag in 2008.
Graphic provided by: TeleChart2007.
 
On the weekly chart (Figure 1), NEM advanced above 50 and then corrected with a falling flag in 2008. The flag represents a zigzag correction of this advance. NEM surged back to 50 in May and then stalled at the upper-flag trendline. A break above this trendline and a move above the May high would be long-term bullish for NEM. The bottom indicator window shows the moving average convergence/divergence (MACD) turning up over the last few weeks and momentum is improving.

Figure 2, the daily chart, looks similar to the weekly chart. NEM surged from late April to mid-May and then corrected with a falling flag into mid-June. Upside volume surged one day, but then contracted as the flag took shape. Low volume during the flag is okay, but volume should expand to validate a breakout. A move above the upper trendline and early June high would be bullish and likely trigger a bigger breakout on the weekly chart.

FIGURE 2: NEM, DAILY. Here, the stock surged from late April to mid-May and then corrected with a falling flag into mid-June.
Graphic provided by: TeleChart2007.
 
The bottom indicator shows the MACD hitting support around the zero line and turning up over the last few days. Momentum is neutral when the MACD is around the zero line. The uptick in the MACD shows improving momentum, and further strength into positive territory would be bullish.



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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Date: 06/18/08Rank: 4Comment: 
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