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Monday, July 12, 2010

Expecting Newmont Mining Corp (NEM) to Move.

-Last week, I wrote about the weak technical outlook of GLD. Currently, GLD is trading $117.38, pretty much unchanged from last week, although the Aug 115/105 put spread is now worth $1.55, down from $2.13. I still feel that Gold prices are poised to move down because stock and bond markets are signaling that global investors are starting to get more comfortable with risk trades.
-Another stock I feel that has potential to move is Newmont Mining Corp. (NEM). Other large gold mining companies like ABX, GG, & AU are down 8-12% on average from their most recent highs. Gold fund GLD, itself is down over 5%. NEM, on the otherhand, hit a new intraday high last Friday of $63.38 and is down only 4% from this price at the moment. I do not know why NEM has shown such relative strength to not only price of gold, but also all other gold mining companies.
- My trading idea is that NEM stock price will catch up to other gold stocks' performance so I could consider a few strategies. 1) buy Gold miner fund GDX and sell NEM in stock of equal transaction amount as a long/short trade; 2) Buy NEM 3 August 62.5 straddle & sell 4 GDX 51 straddle, or 3) Buy Aug 60.0/55.0 put spread for $1.54 or less if you are short-term bearish on Gold prices like I am. I am recommending strategy #3.

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