New Gold Inc (NYSEARCA:NGD) Exhibits Strong Technical and Fundamental Momentum

In the world of growth investing, combining technical strength with fundamental momentum can be a good approach. One method that integrates these elements is Mark Minervini’s Trend Template, which finds stocks in strong uptrends using moving averages, relative strength, and price action. When paired with a High Growth Momentum (HGM) screen, which looks at earnings acceleration, revenue growth, and profitability trends, this strategy helps find companies that are not only technically sound but also showing strong fundamental expansion. This two-part method aims to find stocks with the possibility for continued good performance.

Technical Strength: Following the Trend Template

New Gold Inc (NYSEARCA:NGD) shows a good technical profile that matches Minervini’s criteria. The Trend Template focuses on stocks trading above key moving averages with upward-sloping trends, strong relative strength, and closeness to new highs, all signs of continued positive momentum.

• Price Above Moving Averages: NGD’s current price of $6.46 sits well above its 50-day ($5.20), 150-day ($4.27), and 200-day ($3.90) simple moving averages, confirming both short-term and long-term upward trends.
• Rising Moving Averages: The 200-day SMA has moved up from $3.88 to $3.90, and the 50-day and 150-day averages are also moving higher, pointing to increasing momentum.
• Relative Strength: With a ChartMill Relative Strength score of 94.25, NGD does better than 94% of all stocks, showing strong market leadership.
• Price Performance: The stock is trading within 5% of its 52-week high of $6.80 and has increased 107.7% over the past year, well above the 30% level Minervini suggests.

These technical signs indicate NGD is in a clear Stage 2 uptrend, marked by steady buying pressure and a lack of major resistance levels.

Fundamental Momentum: High Growth Qualities

Beyond technicals, NGD shows the kind of strong fundamental growth that momentum investors look for. The HGM rating includes earnings surprises, revenue expansion, and margin improvements, factors that often come before more price increases.

• Earnings Growth: NGD’s EPS growth is very high, with a 366.7% increase over the trailing twelve months and a 450% year-over-year jump in the most recent quarter. The company has exceeded EPS estimates in all of the last four quarters by an average of 61.2%.
• Revenue Acceleration: Revenue growth remains strong, up 27.2% over the past year, with the latest quarter showing a 41.3% increase year-over-year. Analysts have raised next-year revenue estimates by 9.3% over the past three months.
• Profitability Improvement: Net profit margins have grown significantly, reaching 22.2% in the last quarter, up from 15.0% three quarters prior, pointing to better operational efficiency and pricing ability.

These fundamentals are important because, as Minervini states, “big earnings attract big attention.” Strong and increasing growth in earnings and revenue often brings institutional interest, supporting further price momentum.

Sector and Market Context

NGD operates in the Metals & Mining industry, where it does better than 76% of peers. The stock’s strength is especially notable given its link to gold prices and operational work at its Rainy River and New Afton mines. With the S&P 500 in a positive trend, both short-term and long-term, growth-oriented stocks like NGD are in a good position to gain from wider market support.

Technical Analysis Overview

According to ChartMill’s technical report, NGD holds a top rating of 10/10, reflecting very good trend health, while the setup rating of 5/10 indicates that although the trend is strong, recent price changes may need patience for a good entry point. Key support levels are found between $6.42,$6.45 and $4.68,$4.75, giving clear downside reference points for risk management.

View the full technical report for NGD here.

Conclusion

New Gold Inc represents a good case for investors using a combined technical and fundamental strategy. Its following of the Minervini Trend Template indicates a strong uptrend, while its high growth momentum, shown by strong earnings and revenue expansion, points to underlying fundamental strength. For those interested in finding similar opportunities, our High Growth Momentum + Trend Template screen offers a selected list of stocks meeting these strict criteria.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their risk tolerance before making any investment decisions.