Un till a better picture presents itself we will view the action over the past seven/eight months as a corrective , counter-trend A-B-C. It stalls every time it hits the 4th of previous degree level which it may yet marginally break , but time seems to be running out. It results today were not particularly promising.
SFF.VjcABX could go anywhere from here, we suspect it will be down but , frankly, we couldn’t care less. The idea that one has to ALWAYS be invested fully, on the grounds that you might miss more up than down opportunities, is complete and total nonsense which serves more to hide the brokers incompetence than help the client/investor. The same applies equally to being diversified. Our philosophy is that you should not be invested at all (save for T-bills or something similar) un till such time that you actually have an idea and then go for it wholeheartedly by using perhaps as much as 1/4 of one’s assets. ABX is a good example. From $15 to $21 we made 40% in two months, or, if you prefer, 240% per annum not counting compounding.
In the case of ABX the hardest part is determining where to enter the trade. If done too early the gains will be dramatically eroded but oddly enough, the ultimate outcome does not change all that much. Suppose you bought at $15 but the stock went to $12, provided you held on you would still make the same amount. Why $21/22 to get out? 1. That is where c=a if you get the minimum a-b-c correction. 2. That is where the 4th wave of previous degree lies. 3. That is where the RSI goes to 70 or above. 4. That is where the MACD peaks. 5. That is when we have an acceptable EW structure for a rebound. 6. There were at least 20 other gold miners displaying the exact same pattern. 7. The mood was pretty negative, some even predicting the total demise of this company. There are more reasons but this should suffice. None of them apply NOW so why hold the stock. All this , by the way, is not that difficult. There are at least 20 stocks just this past 1/2 year or so that were presented in this blog for, essentially the same reasons, DELL, Nokia, Best Buy, TRQ , JCP maybe etc.etc. are just a few examples
ABX has hit our target of $21.50 ($21.28 so far). As mentioned a few days ago we would sell here. (For the record our targets should always be viewed as minimum targets; we do recognize that much higher levels are possible, often even likely!). ABX has followed the gold ETF GLD quite nicely. It still has a little more potential but $8 on $14.5 (on ABX) is 55%. For the moment we have no idea where gold or gold stocks will go. But this is an a-b-c and that is a correction so unless it somehow morphs into a 5-wave sequence we will continue with a bearish bias.
ABX needs at least one more day up which may happen tomorrow. At $21.50 we would sell for a gain of about $6 which on $14.5 is 40+% and more if you did it in two separate trades. The stock may go higher but we just like the bird in the hand thing a lot more than speculating. There is a train coming by everyday!