Newmont Goldcorp Corporation (NEM) should remain as a core holding in a diversified investment portfolio. Even so, the stock can be traded. My call is to increase holdings on weakness to its monthly value level at $37.54 and reduce holdings on strength to its quarterly and semiannual risky levels at $40.23 and $44.92, respectively. Consider an allocation to this gold mining stock to vary between 5% and 15% based upon a counter-trade strategy.

Newmont stock is not cheap, as its P/E ratio is 31.92 with a dividend yield of 1.49%, according to Macrotrends. The gold miner missed earnings expectations on July 25, breaking a winning streak of six consecutive quarters of beating earnings per share estimates. This was the first release that included Goldcorp, as that deal closed on April 18.

The stock closed Thursday, Aug. 15, at $38.52, up 13.9% year to date, and it is in bull market territory at 35.8% above its Oct. 25, 2018, low of $28.36. The stock set its 2019 high of $40.33 on July 23.

The daily chart for Newmont Goldcorp

Daily chart showing the share price performance of Newmont Goldcorp Corporation (NEM)
Refinitiv XENITH

The daily chart for Newmont shows that a "golden cross" was confirmed on March 27, when the 50-day simple moving average (SMA) moved above the 200-day SMA, indicating that higher prices lie ahead. The stock could have been bought at and below its 200-day SMA between April 22 and May 30, when the average was $32.02. This signal tracked the stock to its 2019 high of $40.33 set on July 23. The 50-day and 200-day SMAs are now at $37.93 and $33.98, respectively. The stock is above its monthly value level at $37.54 and below its quarterly and semiannual risky levels at $40.23 and $44.92, respectively.

The weekly chart for Newmont Goldcorp

Weekly chart showing the share price performance of Newmont Goldcorp Corporation (NEM)
Refinitiv XENITH

The weekly chart for Newmont is positive but overbought, with the stock above its five-week modified moving average of $37.67. The stock is above its 200-week SMA, or "reversion to the mean," at $33.24, and this level has been a magnet and in an uptrend since the week of Aug. 31, 2018.

The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 80.19 this week, down from 81.51 on Aug. 9. Before bottoming during the week of Oct. 25, the stochastic reading was 7.05 during the week of Sept. 14, 2018. This made the stock "too cheap to ignore," as the reading was below the 10.00 threshold. The stock was a buy at its "reversion to the mean," then at $30.12.

Trading strategy: Buy Newmont shares on weakness to its monthly value level at $37.54 and reduce holdings on strength to its quarterly and semiannual risky levels at $40.23 and $44.92, respectively.

How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on July 31. The quarterly level was changed at the end of June.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble," as a bubble always pops. I also refer to a reading below 10.00 as "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.