Sometimes when bad news happens, but a stock’s price goes up, it is a big hint that the selling is exhausted, and the rally may have just begun.
That is the story behind the stock I show you in today’s Closing Bell video below. It is a gold producer that has lagged behind while the gold price flew higher.
I reckon it is time for it to play some catch up, and after it bounced sharply after some bad news recently, I think it is a case of blink and you’ll miss it.
I even point out where you would dump the stock and what you should expect to see as the rally progresses.
I think it is a classic example of how mean reversion is the enemy of the novice trader.
By the way, before you dive into this Closing Bell and learn about this stock…
I want to give you a heads-up on a special deal we have for Closing Bell viewers, for today only.
It’s a chance to join my Retirement Trader advisory…where you get all my trades…for three months. For just 13% of the full annual price.
It’s a steal.
If you like what we do here, you should do it.
But you should do it now. This offer disappears at midnight tonight.
What you’ll learn soon after you try out Retirement Trader is that traders like to jump on stocks when the chart looks good. But charts usually look good at the top of a range.
If the price is rangebound novice traders will buy at the top of the range and dump the stock at a loss when the price goes to revisit the bottom of the range.
That process is going on all the time in any market you care to look at.
But the gold stock I review today has been oscillating in a range for three years.
Bouncing between the buy and sell zone of the range and then revisiting the midpoint again and again.
So many false starts that traders have become fatigued and given up.
But the range will eventually break. When it does it should explode because the longer a range develops the sharper the move once it finally breaks.
Like a coke bottle shaken up. You take off the lid and kapow.
Hunting for trading opportunities in this market remains extremely tricky, because 70% of stocks are below their 200 day moving average, but the S&P/ASX 200 is testing the all-time high.
My theory is that the flood of passive money is going into the largest stocks and driving them higher thus creating a self-fulfilling prophecy.
The more money goes into them, the more money that has to go into them tomorrow.
But the rest of the market remains in the doldrums with plenty of stocks trending down day after day.
It really is a conundrum as a stock picker.
Either join the crowd and jump into expensive stocks or search for value and suffer the consequences of bear market conditions.
Gold stocks remain one of the few areas in a solid bull market, so I hope you enjoy today’s bounce back stock.
And remember, this special deal for Closing Bell viewers expires at midnight tonight.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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