Tuesday, November 4, 2008
GDX has had a quick 50% gain from its recent bottom. Unfortunately, it had to lose a quick 70% in the 3 months prior, making the recent move of little consolation to long-term holders. Gold stocks can be volatile, without a doubt. However, the major bottom should be in with a potential re-test of these recent lows the worst case scenario. The chart below shows the first major test for gold stocks, represented by GDX.
There should be at least a brief pause at the point denoted in the chart. Even if GDX breaks through, it will probably come back to this level for a re-test before launching higher. A reversal after reaching this level and going back down to re-test the lows made in October is a possible scenario. How much you try to time your trade depends on your time horizon. If you're in for 2-5 years, there will be no regrets buying at this level. If you're in for a few weeks, timing is pretty durned important.
One of the things I have to remind myself in my own little financial journey is to be patient. It's not one of my strong suits. "To be right and sit tight," as they say, can be a hard but potentially very profitable endeavor. How does 200-300% profit in 3 years sound?