-- Posted Tuesday, 28 March 2006 | Digg This Article
Yes, indeed, we all say we're in the gold and silver stocks for the "long term", right? We know we're in a secular commodity bull market. That being true, then why do most of us strive to accumulate more dollars rather than the shares of selected precious metals stocks or the underlying physical metals themselves?
Many of you are still working and able to 'feed in' additional investment funds from your salary. That's wonderful. I was there once. On the other hand, for those of you that now pull down on retirement savings, and need your savings to not only grow, but just as important don't want your portfolio to slide back down when our stock darlings correct, there is a way. And, correct they will - - and with a vengeance!
I look at investing in a sector that's having a secular bull run as climbing stairs. With each upward step (or two, or three, or seven. etc), I want to climb that staircase with my stocks and always be on the highest step. So many times I have sold too soon, and watched my darling continue on up leaving me on several risers lower. I beckon to my darling to come back to me and give me another chance. She only responds when her other suitors abandon her, and tumble back down the staircase into my open arms. Now, all I can do is buy her back for the same number of shares I paid before, and hope she'll head up that staircase again with my embrace. Next time will be different I assure myself.
What I SHOULD have done is sell her out on my terms when she took the first step back down from the highest stair. Nobody wanted her then, so why should I buy her back at full fare?
To short circuit my own emotional response of greed is to impose Percentage Trailing Stops on my investments. A week or so I deployed profits from sell stop closes on many of my precious metals stocks hit when the HUI was hitting its peak at 349 or so. The realized profits were put into selected natural gas/oil stocks. I viewed this commodity sector as bottoming whereas the gold/silver sector had yet to have a serious pullback, and would begin to descend that staircase whereas natgas was on the landing awaiting my escort to higher profits. Risk and Reward based on technical analysis was the only component of my decision. Having owned and sold some of these same natgas stocks previously I am now getting more shares, and expect to ride them higher, and repeat the cycle again and again - providing, of course, this sector continues to offer promise!
Right now I have % Trailing Stops on six of my energy stocks. Although I have profits on all of them, only three have crossed into my "safe zone". With 9% and 11% trailing stops on them, my safe zone is meant to mean that the stocks, even if the 11% sell stop is triggered, I'll still come out with a profit above my buy price. I intend to ratchet up my trailing stop percentage as the sector bull run matures as indicated by higher volumes and froth. Others which trade on the OTC-BB or pink sheets do not permit sell stops so I have to watch them closely in conjunction with the overall behavior of the XNG sector. For those, I have set sell limits pegged above their current prices. Usually somewhere above previous swing highs or Fibonacci targets (we won't go there).
You can review my archive on this site for previous articles on natural gas and precious metals stocks.
For those wanting the full investor menu, the embedded image is from a very comprehensive site
Peter Leeds written for folks like you and me. I don't know anything about them except to say their explanations on investing are very sensible.
- - CV
-- Posted Tuesday, 28 March 2006 | Digg This Article
