Stock Picks: NEM and PXD

The S&P 500 (SPX) gapped up at the opening yesterday, May 21, 2018. It opened at 2,725.95 which is 12.98 points higher than the May 18 close. This is an encouraging sign for the bulls, especially now that the trade war between the US and China has been put on hold.

As the index gathers momentum, let’s look at stocks that are showing bullishness.

NEM – Newmont Mining Corporation

Newmont Mining Corporation (NEM) is a mining company that explores for and produces gold and copper. It was founded by Colonel William Boyce Thompson as a holding company for private acquisitions in oil and gas, mining, and minerals enterprises in 1916. As one of the world’s leading gold companies, the Newport Mining Corporation has assets and operates in North America, South America, Asia Pacific, and Africa. To date, Newmont Mining Company has a consolidated gold production of 5.2 million ounces and consolidated copper production of 119 million pounds.

Technical analysis show that NEM is positioning to take out resistance of 45. This would trigger the large cup and handle reversal pattern on the weekly chart.

To complete the breakout, the stock needs to print volume of at least 7.5 million shares on the daily chart. 45 is a firm psychological resistance as it is the 50% Fibonacci level. Many of those who bought the bottom and the higher low are very likely to dump positions at the resistance. NEM needs buyers to absorb the selling pressure.

Also, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of NEM is 25.24. The stock looks attractive based on its PE ratio considering it is below its five-year maximum of 43.019.

The strategy is to buy the breakout at 45 after NEM generates the prescribed volume. Once breakout is complete, the market will create a new base above 45 before crawling to our target of 70.

The process may take more than six months.

Weekly NEM Chart

Monthly NEM Chart

As of this writing, the Newmont Mining Corporation stock is trading at 39.18.

Summary of Strategy

Buy: Breakout of 45 after NEM generates 7.5 million shares on the daily chart.

Target: 70

Stop: Close below 40 after the breakout.

PXD – Pioneer Natural Resources Company

Pioneer Natural Resources Company (PXD) is a petroleum, natural gas, and natural gas liquids (NGLs) exploration and production company. Formed through the merger of Parker & Parsley Petroleum Company and MESA Inc. in 1997, it now has operations in the Permian Basin in West Texas, the Eagle Ford Shale play in South Texas, the Raton field in southeast Colorado, and the West Panhandle field in the Texas Panhandle.

Technical analysis show that PXD has taken out resistance of 185 and went above the 78.6% Fibonacci level. This triggered the immense cup and handle reversal structure on the weekly chart. The breakout was affirmed by a strong rally to 213.40. At this point, however, the stock is touching overbought territory. The expected pullback could be your opportunity to buy the breakout.

Furthermore, fundamental analysis reveal that PXD’s trailing twelve months (TTM) PE ratio stands at 34.04. While the stock appears to be overvalued, it is actually not. PXD has a five-year average of 73.59. This tells us that investors are willing to pay a premium for PXD shares.

The strategy is to buy the dips as close to 185 as possible. As long as bulls stay above this support, they have all the momentum to move to our target of 240.

The process may take more than six months.

Weekly PXD Chart

Monthly PXD Chart

As of this writing, the Pioneer Natural Resources Company stock is trading at 208.93.

Summary of Strategy

Buy: On dips as close to 185 as possible.

Target: 240

Stop: Close below 180.


Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.