re: Nova Gold / NG trading strategy...
We got a +35-40%ish move from our buy entry yesterday.
If you bought $100k worth of NG, you're now up +$35k-ish.
And that gives you many options...
You could bank the entire trade.
You could bank 1/2 of your $35k profit and let the other 1/2 ride as
"0 cost/free" trading shares.
Or, you could bank whatever % you feel comfortable with, raise stops,
and let the rest ride. And that's what I did, ringing the register and
letting just 1/3rd of my "profits" ride.
Isn't it nice to be in the driver's seat for once? To be trading out in front of
the market, in anticipation of it... instead of trading in reaction to it,
and behind it ?
The key to profiting from this correction has been money management. And
that has not changed.
We've just went from fear to euphoria, all in a 48 hour window. And this is where
discipline comes in.
Discipline...
Think of having your own private little "Trading Nun" that sits quietly
on your right shoulder with metal ruler in hand... ever ready to whack
you across your knuckles every time you let emotion rule... and start
to get either overly fearful and irrational... or, overly euphoric and greedy.
This is why having a written strategy and trading game plan in place is
so important.
Now a trading game plan for a trader is no different than a game plan for a
football coach. It's meant to be a well thought out strategy that "stands like
mountain, yet flows like water."
"Stand like Mountain, Flow like Water?"
... disciplined, but always flexible.
And that means that for our trade in NG, that we had "expectations." That we
had stops in place (and moved them up into the rally), as well as having initial
expectations on where we would expect technical resistance, along with
selecting what indicators we would be following to monitor "live-time" our
"trading audibles" on whether we would let the stock run past our initial profit
taking targets, and/or institute faster stop outs.
In our Nova Gold chart we did not expect any significant technical resistance
until $2.93, the level where last Friday's rally off the same bottom met
resistance. And above $2.93...$3.50 and $4.60 were our next resistance
levels.
So why did I decide to take profits at $2.92 today?
First, because that was where I expected initial technical resistance, and it
would also be a +35-40% pop off of our trading entry yesterday (pigs get
fat - hogs get slaughtered).
Secondly, the other indicators I was watching started to soften. NEM had
some disappointing news this morning... costs rose by $100 an oz, and
they had a less than stellar earnings report. NEM initially sold off, but then
turned green, and when it did, the rally in gold stocks accelerated. But, then
NEM turned red, and the DOW turned negative, and given the recent pattern
of late morning/mid-day weakness that we've seen of late... along with the
expectations of profit taking at some point prior to the 2 p.m. Fed announcement...
it seemed like a logical profit taking level.
I took profits on our trade and let only 1/3rd of my "profits" run here,
(profits, not original position) as part of my money management plan.
I now have what are in essence "0 cost basis" shares in NG that I will
keep stops set at our initial entry and support level, but let ride to see
if we can ultimately make a run up to those higher resistance levels of
$3.50 and $4.60.
I've continually built up a basket of these shares from "trading profits" that I
don't have to loose any sleep over, in this manic, event driven market.
And in addition to that, as part of my money management strategy I've
kept a short trading position on as a hedge to my trading bank, because
we are still trading within a bear market, with a downward bias.
You still need to maintain a "counter punching" mindset to trade this market.
Fear & forced selling must be bought into....
and euphoria & momentum buying must be sold into.
It's working... and it ain't broke... so don't go trying to fix it.
Another money management strategy that has worked... is when you take profits
on a break out stock like NG today, where it was up +15 vs. the GDX's +10% and
the HUI's +8%, is to rotate some of that money back into a laggard.
They're still out there... NG "was" one... and there's still plenty left.
After the noise of the Fed announcement is over... Gold needs to break
back above the key $800 level and stay there for this rally to have legs.
...so trade accordingly.
Let's hope that October was the "peak" of Hedge Fund redemptions and
liquidations. It won't be over, and I'm sure we'll see a wave of end of year
redemptions and tax loss selling as well.... but, hopefully this was the peak.
Stand like Mountain... Flow like Water...
and still be careful out there.
Mo later,
SOTB |
