Surfing the Historic Surge In Precious Metals
- April 15, 2020
- / Jeff Cooper No Ads
- / By Jeff Cooper
On the heels of the highest velocity upleg in gold in history, GDXJ more than doubled in just a month.
From a low of 19.52 on March 13, GDXJ struck a high of 41.42 on Tuesday, April 14.
Last week, we showed how GDXJ was coiled to explode.
Subscribers were well positioned across the board ahead of the surge in the miners having loaded the boat with new buys in GDXJ and GOLD.
With such an explosive advance staring us in the face, why did I recommend subscribers sell the lion’s share of their GDXJ long as well as several other positions in the precious metal miners?
The normal emotion would be to hold or add to GDXJ as it exploded over its 50 day line, leaving an Expansion Pivot buy signal.
After all, GDXJ had also seemed to be telegraphing higher in eclipsing a 100% advance (39) off its March low.
Why lighten up?
Because GDXJ had reached resistance at 41 and squared-out or balanced out according to the Principle of Squares.
Allow me to explain.
Stocks don’t move in a linear fashion. They expand and contract logarithmically based on the square root of where a trend started… hence the Principle of Squares.
The Principal of Squares measures these natural phases of growth and decay.
Known as the golden key, the square root theory assumes that the magnitude of a stocks volatility is directly related to its share price.
Everyone is familiar with cycles of time.
There are cycles of price as well.
Checking a Square of 9 Wheel, which is a visual depiction of the Principle of Squares, shows that 360 degrees (one full price cycle) above the 19.50 low is 41.
This may seem esoteric, but it’s really not.
In fact, legendary investor and fundamentalist John Templeton, who is regarded as the greatest global stock picker of the 20th century, said that if you want to have a better performance than the crowd, you must do things differently from the crowd.
Templeton stated, “The fluctuation of share prices is roughly proportional to the square root of the price.”
So while many traders were extrapolating higher and adding to GDXJ as it cleared 39 because it represented a 100% move off lows and surely indicated further immediate gains, Hit & Run members were selling.
We booked an 11 point gain in the balance of one of our GDXJ long swings.
Does this mean I think the move is over? Not at all.
But selling into buying frenzy does more than just ring the cash register, it creates emotion capital and, importantly, creates buying power for fresh buys.
This is critical when dealing in options, where premium can evaporate on any little hiccup.
Even in the strongest of uptrends there are sharp selloffs. As traders, we want to take advantage of these.
I have been studying and trading the markets for over 35 years when I started my career at the famous Drexel Burnham office in Beverly Hills.
In my experience, knowing what has occurred in the past, you can overlay that history on what is happening today and determine based on the psychology of the market if a similar outcome is going to occur.
It’s a game of probabilities and gaming human nature that gives us direction as to what can take place moving forward.
And everything points to something extraordinary going on in the metals markets.
In this kind of environment in the stock market and the metals markets, I don’t know how anyone can navigate without having a compass from history as to what can take place.
There are very few instances where we’ve had this kind of volatility.
A great wealth building speculative and investment opportunity is before us and at the same time carries implications for us and our families.
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?