Gold Stocks Did What They Needed To Do, Did You?

By Mike Swanson              December 26, 2006   wallstreetwindow.com

Bull markets pullback. They attract buyers as they go up who don't really know what they are doing. They see stocks go up, sit back and think they should buy, don't, then buy at the top because they are afraid they'll miss out. You saw this in classic form in gold stocks last March and now you just saw it again happen at the beginning of December.

And of course every time this occurs you get a pullback that shakes out the loose hands and recharges the bull market for another move up. And over the past three weeks we have had a classic pullback in gold stocks. As I've been writing over the past few years, the XAU gold stock index tends to pullback to its 50-day moving average every six weeks when it is in an uptrend. It also tends to retrace 30% or 50% of its gains on pullbacks too.

Well, on Friday the XAU went through its 50-day moving average and then hit the 1/3 fibonacci retracement level before rallying into the close, to create a potential candlestick reversal. We may see the XAU go sideways another day or two, but by Friday's close it should be back into the 140's, if not sooner.

Now we know what the gold stocks have done, but I'm wondering what you are doing? Are you one of the people who buy at the top and then sell out during times like we saw last week? If so then you need to start to get your thinking right and think backwards from the way you have been thinking. You need to realize that gold stocks are un a bullish uptrend and the best way to take advantage of that isn't by being an emotional manic investor, but to use technical indicators and a careful game plan to time better entry and exit points. This isn't mad money folks. It's slow and steady.

You need to start to buy dips and sell into strength when the time is right. I didn't sell at the beginning of December, because I think we have much higher to go, but at some point I will and I expect to have huge profits when I do, along with other gold investors who don't get shaken out of the market every time there is a temporary pullback.


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