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Knowing When To Panic Is Key

By: Rick Ackerman, Rick's Picks

-- Posted Wednesday, 18 August 2004 | Digg This ArticleDigg It!

Rick’s Picks

Wednesday, August 18, 2004

For investors who’d rather be smart than lucky

Several subscribers sent word yesterday that Mahendra, an affable guru with a large following of gold bugs, had turned super-bullish on gold. He expects bullion to rocket higher imminently, along with silver and palladium. By imminently, I am not talking about any day now, either, but within no more than 28 hours from the time the bulletin went out, apparently on Tuesday.  You gotta love a guy who goes out on a limb like that, making predictions that are clear, precise and about as subtle as an air-raid drill.

Right or wrong, he is evidently not a man lacking in conviction. Imagine the sparks that would fly if he and ski-signal guru Jeff Kern were patched into the same karmic switchboard. Lately, Jeff has been as bearish on gold as Mahendra has been bullish, but each has hit enough forecasting bullseyes in the past to merit our serious attention. In practical terms, that might entail, say, buying short-term, at-the-money straddles while shorting longer-term, out-of-the-money strangles. Or some such.

‘Third Way’

There’s a Third Way, too: sit tight and wait for an important hidden-pivot support or resistance to get ruptured. Hidden pivots never sleep, and neither do they take sides unless provoked. Granted, we could conceivably miss the booster stage of a sharp rally in gold. But when you’re focused on a bull market that could take another ten years to unfold, why go out on a limb? With respect to my bullish forecast for Comex gold, for instance, you could buy-stop yourself into a long position above 414.50 and stay on board for, oh, the next five years, assuming the bull is about to enter an important new phase. You will have missed the hop-skip-jump from today’s high, 407.70 (3 ticks above the rally top I’d projected), to 414.50, my next bullish trigger point, but so what?

Mahendra, who bases his forecasts on the alignment of the planets, is a class act, as far as I’m concerned (as is Jeff Kern), and I’d love to see precious metals begin to soar tomorrow, exactly as he’s predicted. And while we’re at it, since we’ve been accumulating put options in Citi, the Qubes, Diamonds and the homebuilders, shouldn’t we be rooting for  the broad averages to take the cliff dive we all know has been coming since last February? Just to clear the air, mind you. There are a score of stellar technicians I know who have been looking for just such a catharsis, and wouldn’t it be nice if they – make that, we – were right this time. This week.

Bailing Out With Style

Unfortunately, it doesn’t usually work like that. Experience has taught me that the more urgent a forecast -- “MAYDAY! SELL EVERYTHING!! NOW!!! -- the less chance it has of being right. One of these days, though, it really and truly will be the time to “sell everything.” Let’s hope that when that day arrives, we’re in the proper frame of mind to panic with the confidence it will take to be first out the door.  


Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2004, Rick Ackerman. All Rights Reserved. 

-- Posted Wednesday, 18 August 2004 | Digg This Article


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