The Market Moves in Swings and Cycles That No-one has yet Figured Out
When someone figures out what the future price of the stock market will be, it will a momentous day. Until them, I urge the investor to use the tried and true methods, which I describe hereafter.
First, on a regular and repeating basis, every sector, has waves of prices moving higher and afterwards waves of prices moving lower. After a dramatic rise in value, a fall back in value normally occurs. If a trend is strongly in one direction, after the fall back, movement in the original direction usually starts again and continues. However the fall back can be quite punishing and destructive with investors left reeling.
Gold at $1,900
I cautioned investors at that time that buying gold at the $1,900 level was an enormous gamble, and I urged patience and caution. That time I was right on the money. My call was dramatically correct. I only wish I were always correct. No-one ever is always correct in the market.
Secondly, Pick Stocks That Have Real Value
Most advisers look at trends in sectors and advise investors based upon the general trend of that sector. If the trend of junior gold miners is up, then a rising tide carries all boats up. This is generally true, yet a falling tide falls far faster than a rising tide rises, so when the inevitable pullback comes, stocks with real value remain afloat. I have previously mentioned some of those stocks.
Lastly, Patience and Following the Charts
If a stock has excellent underlying value, and if it falls in value, one must reexamine the underlying factors to see if those values actually were as good as originally estimated. If they are, hang in, and have patience. Riding a tide does take time, but value is value.
Watch the pattern of the stock on the chart. If there is a trend or a pattern, pay attention. Pay close attention. Even if you are correct in your beliefs, if the market is moving against you, pay attention.
Many years ago, I used to seek advice from so-called “people in the know“. At those times, in the early days, I would think that Investment Advisors knew what was good and what was bad. What I didn’t know, is they are in their own world and advise based on factors that are often completely extraneous to what my intentions are.
I also thought that what happened to a stock previously was not terribly important and only the future counted.
As I became more knowledgeable, I started listening to the technical analysts, and I started looking at the charts. Now I know, that if you buy or sell something without a close look at the charts, it is the height of Folly.
It is Essential to Look at the Charts
The best advice that anyone can follow, is before you buy or sell, always look at the charts. Just about every online broker publishes charts. There are dozens of free sites on the web that publish charts, such as “Big Charts”, or “Kitco”, or many others. These charts are usually 15 minutes behind real time, but to the average investor, that is irrelevant.
You simply cannot buy a stock when its trend is in the wrong direction. If you think a stock is a good value, and it is moving DOWN in the charts, buying that stock until it bottoms is pure foolishness.
Have you ever heard the phrase “Catch a Falling Knife and it Will Cut You“? If a stock is falling, there is a reason. Think about those reasons.
Perhaps others know more than you do about a situation.
Perhaps that sector is falling out of favor for some reason.
Perhaps someone is shorting the stock and trying to force it lower.
Perhaps your take on the matter is a misunderstanding.
Perhaps a lot of other things.
But if the Trend is Against You, Never Fight the Trend.
Bottom Line – Before you buy something, always take a moment and look at the chart. Obviously the converse is true if you are shorting or selling a stock.
We may or may not have positions in the securities we name. In making an investment decision numerous factors must be considered including portfolio balancing, timing, cash and capital reserves, asset allocation and other factors. Readers are strongly advised to do their own research. Matters discussed contain forward-looking statements that are subject to risks and uncertainties and actual results may differ materially from any future results, performance or achievements expressed or implied.
Views expressed are opinions and not investment advice. Persons investing should retain a licensed professional to guide them and not rely on the opinions expressed herein. This report is neither a solicitation nor a recommendation to buy or sell securities. We are not a registered investment advisor nor a broker-dealer. The information contained herein is based on sources which we believe reliable but is not guaranteed as being accurate or a complete statement or summary of the available data.
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