|Go for the Gold!
|February 27, 2007
*** Special Bulletin ***
Please repeat after me: “So the market plunged. Who cares?” Yes, I know the Dow, NASDAQ and S&P 500 were each down over 3% today. And I know that I probably sound like a broken record, but with technical analysis, it really doesn’t matter what the market does. My Trending123 subscribers and I aren’t sweating it, because we knew a correction was coming. Plus, our stocks held up fine today. In fact, we’re getting ready to do some bargain shopping, so watch this space for some hot new stocks next week. And now back to your regularly scheduled Trade Talk Weekly…
All acting is reacting. Or so goes the adage. Yep, that little morsel of truth is probably told to every wannabe actor in the world.
Seems to have worked in the case of Oscar winners Helen Mirren and Forest Whitaker. But if they were to come to me with advice—for investing, certainly not acting—I’d tell them to change up their game plan!
What’s the equivalent of an Oscar in trading? Perhaps a star-studded portfolio? I could promise them a good shot at one of those!
But the only way they’d have a shot at the top prize is to heed my advice. Drop the robotic act of most investors — stop reacting to every piece of news you hear or read. Bad news hits the wires — everyone’s nervous and the market spirals downward. The headlines beam with positive news and everyone is cheering for the bursting-at-the-seams market.
Stop the madness! Cut your wires…clear your cache! Whatever you have to do to make this unstoppable cycle of reactions stop. It’s time to take charge of your emotions!
On My Cue
So are you ready to calmly plot out your market moves? Well then, this is where I make my push for technical analysis as your best offense.
Let me give you an example. Last Monday I sent an update to my Trending123 subscribers about Gold and Commodities. I said that $Gold would drop sharply prior to the Bank of Japan’s (BOJ) announcement on interest rates on Wednesday and that $Gold and the $CRX were at key resistance levels and were stalling.
Then I warned my subscribers about a sharp drop in commodities that would occur on Tuesday but that commodities would rally right back up in a positive reaction on Wednesday due to the interest rate announcement made by the BOJ and the CPI numbers.
Well, let’s just pause a moment while I congratulate myself — this is exactly what happened and it was nothing short of shock and awe!
Why were investors so stunned? This occurs whenever “people we don’t see,” such as banks and institutions, are unwinding a short position. The drop on Tuesday—which was manipulated—enabled them to cover their short positions prior to the announcements.
Normally I do not follow fundamentals because that is not what technical analysis is about, but in this case, I knew that the BOJ and CPI announcements would affect how our stocks would act on Tuesday and Wednesday.
You all know that there are three numbers in the name of our service, Trending123. What you may not know is that they are also part of a famous series of numbers called the Fibonacci sequence, which is used in many fields, including trading. Its name comes from an Italian mathematician, Leonardo of Pisa, son of Bonaccio—in Latin, filius Bonacci, or simply Fibonacci. Fibonacci helped popularize both this sequence and the superiority of Hindu-Arabic numerals (1, 2, 3, etc.) over Roman numerals (I, II, III, etc.) in the early 13th Century.
The Fibonacci sequence starts with 0 and 1. After that, every number in the sequence is the sum of the previous two. So, since 0 + 1 = 1, the next number is 1, giving us 0, 1, 1. Since 1 + 1 = 2, the next number is 2, giving us 0, 1, 1, 2. Can you guess the next number? Yes, you got it—it’s 3. Continue the pattern, and you get 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on to infinity. Interestingly, the higher you go in the sequence, the closer the ratio between each pair of consecutive numbers gets to the Golden Mean, or 0.618. People of various cultures, from the ancient Greeks and Romans to stock market analysts today, have believed for millennia that this ratio occurs again and again in nature and human behavior.
In modern trading, we can apply this to identify retracement levels useful for setting target prices, stop losses, and strategic points to place transactions. For instance, in a strong trend, the minimum retracement level is generally anywhere from 38.2% (1 – 0.618) to 61.8% (.618. The difference between 61.8% and 38.2% is 23.6%, and the median point between them is 50%. Together, these four numbers (23.6%, 38.2%, 50%, and 61.8%) represent the key Fibonacci ratios. If you take a stock chart and draw a line at each level relative to a stock’s highest and lowest price over a given period, you’ll have a better idea of where the price might find support or resistance in a retracement before it continues its trend.
As you can see, we have a lot to thank Fibonacci for. After all, just think how difficult trading would be if we measured stock prices in Roman numerals: “The closing price of GSS yesterday was III dollars and LXXXVI cents.”
You see how I used the news ahead of time to act rather than react (after the fact)?
You see, charts can give you the “Big Picture” trend. They can also foretell when they are going to react to news. This is where technical analysis can help you eliminate your emotions from your trading by alerting you in advance that something is going to happen.
Therefore you’ll stop reacting to news-driven events thus enabling you to act rather then react. It’s hugely important to notice the difference between the two.
Now that you know what to do, let’s say we put it into action, eh?
I just suggested this play for my Trending123 subscribers. It’s a buy and hold position that I continue to recommend. So find out more about it below and then get in on it!
Golden Star Resources Ltd. — (GSS)
GSS is a medium risk Gold play. GSS has always been a front runner in the Gold sector. In January 2007, GSS went up 11%, and this month it is up 17.68%, and on good volume. GSS has been in a bullish trend reversal on the monthly since 2002.
My prediction: I think we will back test 38.2% level and then move up to double top at 100% at around 22.00. I don’t know when we will hit that price target. Do be prepared for sharp and swift dips in this stock.
This stock is a buy and hold for 12 months or longer. GSS is outperforming the $Gold by leaps and bounds. It is an investor trade, meaning that it is meant to be held for 6 to 12 months, or until price target is reached at $10.00 or higher. You do not need to watch every tick on this stock, just buy and hold it as an investment until price target is reached at $10.00 or higher.
Click here to view the charts for GSS.
You want to know more? Get yourself acquainted with my site here: http://trending123.com. If you want access to everything on my site, including my latest updates and alerts, then I invite you to give my Trending123 service a risk-free try today. Click here to find out more about this special offer!
P.S. I just closed another trade for fat profits at my Trending123 trading service. 109.91% gains from Zoll Medical, in fact — in just over four months. That was one of our best quick trades ever! And a sign that just like fine wine, I’m getting better with age. You don’t want to be outta the loop for the next great gains. Join me now.
P.P.S. If a trade does not make gains right away there is no point of being in it. The only things we trade at Trending123 are stocks that make you money right away—otherwise it is dead money. Make your money work for you: Try a risk-free trial to Trending123 today.