isopatch,
I had to stretch the weekly out pretty far on these SI charts to get the examples I wanted, so get your reading glasses out, ggg.
Note the steep declines on MDG in mid 98, talk about a flock of crows! Yet these two declines marked a turning point for the company where it first formed higher lows. Also a fractal like decline in late 00 (for comparison purposes am ignoring the dissimilar decline of mid 99). There are discrepancies aplenty, but the best indicator of all seems to have been to buy on the -20 stochastic.
siliconinvestor.com
Now note CDE chart over a similar period, no "V" bottoms and buying on the stochastic 20 touches would have resulted in large losses. Note in particular the fractal pattern between the late 99 decline (which preceded further losses) and this current decline. Outside of a recent divergence in the RSI and MACD, there is little hope in this chart:
siliconinvestor.com
SOOO, why did I buy almost the exact bottom (I hope) on CDE on Friday?? TA wise, crow wise and otherwise it seems a risky proposition! (Guess this amounts to disclosure, ggg)
There are several reasons and one must transition between TA, FA and sentiment to see them.
TA wise, the chart is saying "Give me a double bottom or give me death".
The poor fundamentals of most silver stocks suggest sentiment wise that after a long Silver Bear (worse than the gold bear) investors are now over reacting to the dilution of the recent CDE exchange offer*. TA indications are this stock is in trouble, yet the liquidity supplied by that very dilution may result in CDE being able to weather what remains of the Silver Bear and survive until the transformation to the Silver Bull.
None of this was sufficient in my decision to buy what amounts to a silver option with expiry only on death (of the company). Of importance also was the general observation that the silver stocks are lagging the gold stocks in recovery (BTW, this is a conclusion that only recently has become compelling to me, I have traded mostly gold stocks to this point), that there are very few silver pure plays around that are not total basket cases and that the company FA suggests that CDE will likely survive.
Could I be wrong? Absolutely! In which case my "option" will expire worthless if CDE does, yet the downside seems limited to a retest of support, which we may have just had.
So the clincher to my decision was my sentiment estimate of CDE stock holder psychology in view of yet further uncertainty in face of tremendous stock price losses over the past four years that has caused me to conclude that the recent "flock of crows decline" in CDE was fractal to MDG's 98 declines and hence the likelihood that CDE will also turn around as MDG has. "Options" only pay big if the sentiment is way overdone. And in the end, with the PM stocks, after all the TA and FA are done, sentiment is the key.
Sometimes a flock of crows may indicate they are harassing a potential Golden Eagle rather than devouring a carcass.
*links to the exchange offer
biz.yahoo.com
biz.yahoo.com
biz.yahoo.com
Best Regards,
Roebear |
