Profit Taking....Dear SpeculatorsThis was in my inbox this morning from Casey Research... it is interesting to see a ton of explorers and big miners all down today. Big money moving out? Healthy correction? Is somethign big coming?
Interesting read from Casey Research.
"Dear Speculators,
Did you notice that even as gold hit a three-month high on Friday, a lot of gold stocks were selling off?
Pretium, Klondex, Silver Wheaton, Fortuna, Franco-Nevada, Goldcorp… The list goes on.
Why?
Profit-taking would be my guess.
Gold breaking through the $1240 ceiling it had been bumping against for weeks was an important psychological event. It was also a liquidity event for those whose stocks are way up this year. I’m sure that many larger players took the opportunity to rebalance their portfolios.
If the current gold bull were long in the tooth, I’d worry that this move might be a leading indicator of the market turning. But with this bull market still in its infancy, I’m not alarmed.
Speaking of profit-taking, this is an opportune time to point out that a big part of why we did so well last year is that we took profits when we had them—seven times, in fact. Those Casey Free Rides helped a great deal when the market went into reverse in the latter half of the year.
There’s an important lesson in there for anyone who has not yet got the message. Given how volatile our stocks are, and how difficult that makes it to use stop losses effectively, the Casey Free Rides are an essential part of our overall strategy.
Another key part of the Casey Method is not chasing stocks. It may seem trivial paying 10% or 20% more for a stock that we hope will be a 10-bagger, but 1000% gains are never a sure thing. Paying too much reduces your gains and increases your risk of loss.
A case in point here is my reluctance to chase uranium stocks this year. The price of uranium was up in advance of any change in the fundamentals. Those included—and still include—a supply glut with sellers willing to liquidate stocks at any price. Sure enough, uranium is now correcting. It traded for as little as $22.56 last week. Uranium stocks are following suit.
This is great news for the patient among us. I’m hopeful that we’ll see even better buying opportunities ahead, as I am very bullish on uranium in anything but the very nearest term. Watch this space.
And, despite Gordon Gekko’s famous words, don’t get greedy. Greed is not rational. It’s destructive.
Rational self-interest is different. It requires discipline, but it’s the essential constructive force driving every economy.
Reason pays.
I’ll leave it at this for this week, as I’m still on the road, kicking rocks on your behalf. Next week I will be at the PDAC Convention in Toronto. I’ll have my usual “best of show” thoughts for you afterwards. I hope to see many of you there!
Sincerely,
Louis James"