Last Friday, I outlined my strategy to reload a gold position. To recap I said that I would enter first with small, well-researched prospect generator/exploration companies that were selling at very low valuations to assets, cash, and potential. Then I would attempt options on the large cap miners, and if we got into a run, I would trade the large cap miners.
I didn’t know as i wrote that article that gold would pop so much that day. Nonetheless, since then, gold has sagged and as I write this, gold is dropping big on the jobs report and the dollar is jumping higher for the same reason (or perhaps the strong dollar is simply pushing gold down:). So where do we stand?
I had “snuck” into a small prospect generator company on a stink bid last week. A stink bid is a buy limit that you put on at a price you think would only be hit on a liquidation panic. Well my price was hit (often this is quick as a stock will panic sell down 5-10+% then bounce back up). Size was 0.5% of portfolio. If you read that article, then you know I likely didn’t add too much to that trade as the uptrend lasted only 2 days. I did try a trade in a platinum ETF but sold out Wednesday when I noticed the metals market stalling. So I only* own that small position which because it was bought so cheaply, is still positive.
Today is a gold test – can it survive a “good” economic report and come back from a decent drop. If not, we’ll likely test new lows. And then I’d try my tactics all over again. By the way, this strategy might work with any industry I’ll bet – find small leveraged plays that are completely beat up, start there with small positions, then try options on the industry ETF, then trade the ETF on good technicals.
Good hunting out there…
*I still own bullion which I don’t include in my “trading” as I own it for different reasons