“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.” – Victor Sperandeo
Those of you who have been subscribers for a while know that I’m a Hit & Run trader.
However, you also see that I’m willing to be patient if I think a big fish is on the line… such as the metals.
This may seem like a dichotomy and at times it certainly puts me at odds with myself.
But then a speculator must learn to embrace chaos.
As a trader, I’m transactional by nature — perhaps more so as result of seeing my dad go broke in the market when I was a teenager, I also got to see him ultimately take back three times what he lost.
Charlie Munger said, “It’s the waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
Jesse Livermore said, “Traders who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make the big money.”
I have learned that risk must be measured by the amount of time you are in a stock.
The way I deal with a big picture situation such as the metals is to keep a core position and trade around it.
This brings me to silver miner AG, which we’ve been in and out of swing positions in probably a dozen times since the important August 2018 turn.
Late last year I said I wanted to put my investor's hat on as to the metals and give them a longer leash.
In so doing, we avoided being stopped out of the November flush followed by a breakout that proved to be counterfeit… leaving the sector in no man’s land.
Until yesterday — when leaders such as AG spoke.
William O’Neil told me there are two ways to judge the market — by the action of the market itself and by the leaders.
Ditto a sector.
Let’s examine AG, a leader in the PM mining sector.
The following daily AG showed it tested its summer high at the early January high in metals.
In so doing, AG carved out the right side of a Cup.
The pullback to the 50 day line followed by this weeks explosive rally underpins the idea that AG was working on a Handle to the aforesaid Cup.
On Tuesday, AG left an Expansion Pivot buy setup that telegraphed Wednesday’s rally that accompanied the largest expansion in volume in a year.
One could look back at the July peak and say that the surge in volume at that time marked a high, couldn’t yesterday’s rally mark a Climax Run?
Anything’s possible but the July top followed months of rally off the March low.
As well, AG rallied sharply one month into the July top.
Importantly, AG traced out a pattern high in July. In other words it didn’t just fall out of bed—it backed and filled before faltering. Distribution. This is a more convincing sign of a pending correction/decline.
Given the bullish looking Cup & Handle of 180 degrees/days in duration, I think the benefit of the doubt goes to the bull case. This weeks impulse comes a geometric six months from the July top.
Let’s look at the Principle of Squares reflected by my Square of 9 Wheel (see image below).
The last major swing low, the low of the Cup is 9.33.
Moving the decimal point to get 93 to give us more nuance as to its vibrations, we find that 135 or 13.50 is 360 degrees up from 93.
Yesterday, AG closed above 13.50 at 13.90.
At the same time, it closed above the January 8 gap down.
Follow through after offsetting this gap is a bullish event.
Notably, the next square up of 90 degrees from 13.50 is 14.70 (147).
AG reversed from 14.55 on January 4.
The presumption is clearing and closing above 14.70 projects to 159 or 15.90.
Above 15.90 projects to 185 or 18.50.
This is two cycles of 360 degrees up from 9.33.
Interestingly, AG struck a high of 19.15 on its torrid 6 month run into August 2016.
August has been a key turning point in the metals since gold’s prior all-time high in August/September 2011.
With this summer being 5 years or 60 months from the August 2016 high, and this summer being 180 degrees from January and 360 degrees from this last summer’s high, a breakout here in leading AG underpins the potential for a six month rally phase.
Red is 93. 135 and 185 (9.30, 13.50 and 18.50)
Green is 159 or 15.90
Notice that all vector January 20, blue
In the spirit of fair disclosure, Hit & Run members are long a swing position in AG from 10.30.
