Schaeffer: New Look at Newmont

06/27/2003 12:00 am EST


Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

Schaeffer's Investment Research (SIR) is a complete, one-stop shop of information and services related to the options market. While some may view this as a market only for short-term speculators, SIR includes many insights and strategies that can be incorporated into even the most conservative, long-term portfolios. For example, Bernie Schaeffer remains bullish on the long-term prospects for gold and a number of analysts at SIR like industry leader Newmont Mining on a fundamental, technical, and sentiment basis.

Beth Gaston says, "Newmont (NEM NYSE) is the world's top producer of gold. Since late March, NEM has been rallying strongly, gaining some 35%. The stock was recently downgraded by J.P. Morgan Chase, who reduced its rating on the shares to a 'neutral'. Merrill Lynch followed suit. NEM may find strength in a solid 'wall of worry' that has been constructed on the equity. What's more, the number of shorted NEM shares are at their highest level since February 2002."

Adds  Matt Essen, "Here's one more reason to look long and hard at NEM. Many times previous resistance will turn into support on the downside. I have recently written several articles on Newmont and its historic battle at 30. After suffering several setbacks, the stock was finally able to break through. Betting on NEM might not be a bad idea. Using a stop at a break of 30 leaves less than 10% downside risk. With the recent strength in this name, that is not a bad risk to take."

William Bruns notes, "Newmont (NEM NYSE) makes our bullish list. From a technical perspective, after rallying into new 52-week high territory in mid-June, the stock has fallen back to support at the site of its ascending 20-day moving average. This key trendline has provided a solid level of support for the stock during the equity's rally off of its mid-March lows. While NEM's technical uptrend remains intact, sentiment continues to be skewed to the bearish camp. To begin with, options players are less than enthusiastic with respect to the stock despite its strong technical backdrop. Our research indicates that the security's Schaeffer's put/call open interest ratio stands at a reading of 0.67, which is in the 69th percentile of the past year's worth of data. In addition, Wall Street maintains a skeptical bias with respect to the stock. According to Zacks, only six of the 13 analysts following the firm rate it a "buy" or better, leaving ample room for upgrades to drive the shares higher. Traders should target a move up to 35.33 with a stop-loss set for a trade below 30.51."

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on