NEM (Newmont Mining Corp.) is one of the trade ideas that was added to the Live Charts page on Dec 31st as one of my top picks in the gold & silver mining sector for 2014. From there, NEM went on to hit the first profit target (T1, which was the top of the wedge pattern) about 3 weeks later, then made one final thrust back to the bottom of the pattern before finally breaking out and going on to hit the second target (T2) on March 17th. From there prices immediately reversed and have now come back to test the pattern from above. This backtest provides an objective re-entry into NEM for those who booked partial or full profits at T2 as well as an objective new long entry for those looking to add some exposure to the sector.
When trading the sector, I find it imperative to adjust my position sizing lower that usual in order to allow for the larger than normal stops that are required to successfully trade such a volatile group of stocks as the gold & silver miners. As always, risk & reward go hand-in-hand and this increased volatility and above average loss potential is made up for with above average gain potential. I often use a “shotgun” approach to the sector by diversifying my exposure amongst the individual mining stocks with the most attractive chart patterns although trading GDX (Gold Miners ETF), GDXJ (Junior Gold Miners ETF) & SIL (Silver Miners ETF) certainly make sense for those preferring simplicity or seeking to mitigate volatility in their portfolio via the diversification offered by ETFs.