As the Iran war enters another volatile phase, Newmont (NEM) seemingly makes for a great contrarian trade. Sure, NEM stock is currently sitting on an 88% Strong Sell rating by the Barchart Technical Opinion indicator. However, it's possible that the escalation of hostilities could provide a temporary boost to the share price. Also, because NEM is down nearly 12% in the trailing month, it may be a positive mean-reversion candidate.
Another wrinkle to support the short-term bull case is Newmont's upcoming second-quarter earnings report. On July 23 after the market close, the gold miner is scheduled to release its financial results, with analysts calling for earnings per share of $2.18 on revenue of $6.38 billion. Given the fact that Newmont has enjoyed generally strong results in recent quarters, another beat wouldn't be out of the question.
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For NEM stock, a bit of good news could be enough to help right a sinking technical ship. However, will it be good enough to change the longer-term trajectory? That's where things get a little complicated.
On a fundamental note, you would expect that a rapidly spiraling geopolitical conflict — especially involving a critical waterway — would lead to a rise in the value of gold and other precious metals. But it's not entirely clear if the valuation lift will be enough to tilt the scales in favor of NEM stock.
One obvious headwind from this conflict is the global energy market. Even if gold prices shoot up, the rising cost of fuels that power mining operations will also rise, thus cutting into profits. Another big issue stems from monetary policy. With the Federal Reserve previously being hesitant to reduce rates, going dovish now would likely exacerbate the inflation crisis.
So, it's not a clear picture — and the smart money is making its thoughts known.
Easily one of the most watched options expiration dates is for this Friday, July 24. When you look at the volatility skew, the chart shows a "smile" rather than a "smirk." This description means that traders are paying a high premium for downside protection via out-the-money (OTM) puts but they're also paying an elevated premium for upside convexity via OTM calls.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
