“When Gold registers a monthly overbought signal and is trading at > 40% above its 50 month moving average, the price consolidates and is followed by a concerted effort at mean convergence”
It’s a little different initiating a new ‘long’ at todays prices compared to being ‘long’, long ago.
Reports suggesting a ‘melt-up’ have validity because of momentum, but one should forfeit the right to complain if gravity takes hold.
In a continuation of my Alcoa post earlier today, Newmont Mining’s stock price is now dancing at ‘extremes’ not seen for some time.
The first chart below is an illustration of the various times that Newmont’s stock price has traded at high levels of percentage above its 200 weekly moving average.
Other than the shocks of the respective 1981 interest rate hikes and the 1987 stockmarket crash, Newmont Mining’s stock price doesn’t necessarily spend time up in this stratosphere.
My case is not a one-way street.
Note the highlighted ellipse in the chart surrounding 2003 and 2005.
Newmont trades at 101% above its 200 WMA in the last part of 2003, then attempts a mean reversion to then rise back to the same stock price, YET the percentage reading is ‘only’ 57%.
This is because the 200 WMA ‘rolls up’ quickly to catch up with the parabolic move seen through 2003.
The 200 WMA will move higher, while NEM stock price declines.
This is the convergence that I mention in the previous Alcoa post.
So, I’l look for Newmont’s stock to work its way back to the $64-$68 mark in the coming 9-13 months.
The second chart compares Newmont to the Gold price (in USD).
Similar to Alcoa, it’s plausible that Newmont uses its well priced equity to make some acquisitions or raise some capital itself.
rob zdravevski's blog 