It’s getting to be crunch time again! Prices are yet lower again this morning, and are going to, in all likelihood, test support real soon. I want you to keep this in mind and think on it: Prices did a double-bottom kind of thing last December and January, at the end of their bear market. But, they also did a shake-out action, which got the last hangers-on to sell-out right at the bottom. I will not be surprised in the very least, if a similar shakeout type of action were to take place soon.
Shakeout price action is the most frustrating thing you might experience as a trader. It will happen like this: Everyone who’s in on this trade knows where the price support is… Everyone! That being the case, there are truly ‘Big Boys’ who do know how, and are capable of, gaming the system for themselves. How they do it is incredibly simple. They will push prices down beneath support, and get as many others to act on their stops, and commence a great deal more selling, as the ‘rules-based’ traders act on their pre-determined stop-losses.
Then, as soon a their selling lets up, these same ‘Big Boys’ step up and commence fierce buying for the very best prices, and off it goes… without those traders who sold off. Arghhh! Those traders will want to buy back in, at prices higher than they sold out at, and their further buying pushes prices ahead faster, making more for those who caused them to sell in the first place.
So, here’s what I suggest. I won’t be acting on this advice myself… got that? Since I believe this is fairly likely to happen, I’ll probably not be a seller, but if I see it taking place, will likely add more… BUT, if I were required, as one who was responsible for another’s money, I would counsel the ‘wisdom’ of selling right now, and then wait for a sure confirmation of a new, true rally lift-off. You are responsible for your own trades, and you must do as you see fit, but have a plan in place before anything more happens, and then work that plan!
I’ll run the risk of sticking with it, but if I think the above shakeout scenario is unfolding, and my indicators are in the right place, I’ll be adding to my positions in any kind of melee and panic that might ensue. Only because I have become quite fearless anymore at this stuff. I can stomach it, and I believe that far higher prices are out there ahead of us, and I can wait. If this should happen, and I am wrong… I will get hurt. I realize that, but that’s my responsibility, and I’m willing to bear it. If you can’t… don’t!
Here’s to your accumulation of real wealth!
Harold F Crowell