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Gold stock could lose its luster in July

Commentaries & Views

NEM is staring up at stiff resistance for the past month, too

Posted 6/30/20 @ 10:12am ET

#NEM #GOLD

July is right around the corner, and Schaeffer's Senior Quantitative Analyst Rocky White is back once again to outline the best and worst stocks to own for the new month. As gold prices continue to climb in the face of stark economic uncertainty, Newmont Corporation (NYSE:NEM) has tacked on 31.5% this quarter. However, as July heats up, the gold stock could be due to cool off. In fact, NEM shows up on a list of the 25 worst S&P 500 performers in July, looking back over the past 10 years.

More specifically, looking back over the last decade, Newmont stock suffered an average June loss of 2.4%, with only four out of the 10 returns positive. That's good for second-worst on the list, and the only mining name to be found among the lineup. At last check, NEM was trading at $59.02. What's more, the shares have encountered stiff resistance at their 40-day moving average in June, despite a 35.6% year-to-date gain. 

Worst of July

In the options pits, traders are focused on calls. Newmont stock's 10-day call/put volume ratio of 4.2 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 76% of readings in its annual range. In other words, long calls are being picked up at a much quicker-than-usual rate.

Echoing this, NEM's Schaeffer's put/call open interest ratio (SOIR) of 0.63 sits in the low 7th percentile of other readings from the 12 months. This suggests short-term option players have rarely been more call-biased.

Daily Stock Chart NEM

By Patrick Martin, Managing Editor at Schaeffer’s Investment Research

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