SEP 1, 2016
Kal Kotecha PhD
I am loving this correction!
I am relishing the fact that gold and gold stocks are ‘correcting’ as profit taking takes hold and many private placements become free trading – resulting in price drops on some great stocks.
As an investor, you have to be screaming with joy that this is happening. Talking with many of my associates, they are crying the blues that this correction is happening. I just reminded them that they were also crying when they missed out on buying these stocks at their lows last summer. Even though we won’t reach those hideous levels again for a very long time, these mini corrections are great for accumulating and adding to one’s portfolio – if of course you believe that gold is a good investment and that it is being manipulated. Why else would you be reading this article unless you believed in the long term ascension of gold?
Technical support and resistance for gold is around $1250US per ounce, about a $50 drop but it may not reach that level. No one can always buy at the low and sell at the high but if you are close to buying at intermittent lows and selling close to the highs, you will be a profitable investor.
The key is to recognize that we are in a long term secular bull market that will have its share of dips. Ken Little www.thebalance.com/buying-high-selling-low-3141301sums it up this way: Buy low and sell high is the ultimate guide to successful stock investing. It is also the reverse of what many investors do. It’s not that investors start out to do that, but too often, they use price, and in particular price movement, as their only signal to buy or sell. Stocks that have gone up recently, especially those with a lot of press, often attract even more buyers. This obviously drives the price up even higher. People get excited about what they read and see and want a part of the action. They jump into a stock that is already trading at a premium – they buy high. Remember, if a stock has had a good run up it may be time to sell, not buy (sell high). Similarly, if a stock has dropped like a rock, it may be a good time to buy rather than sell (buy low). You won’t know what to do unless you understand a lot more about the company than its stock price.
Now this is not a new concept for any investor but it is easier said than done. Fear sets in when prices drop – it’s natural. Will the stock ever go up again? Why are people selling? Should I be buying?
Ask yourself, have the fundamentals of the companies changed? If you liked them a couple of weeks ago, you should love them now!
Kal Kotecha PhD