The mining sector has really been beaten up. I’m still swamped but I’ve been buying into the significant downside using my major/minor buy technique.
The last few days have seen some major resurgence. It could be a “dead cat” bounce, but I think we are in for a near-term big rebound. That’s not to say one should go “all in”; you never should.
GDXJ made its way back up to $22.26 from $18.40 on Aug 5th. That’s a quick 21% gain in just 5 sessions from what could have marked the bottom. SIL and GDX have had similar resurgences.
As I said previously this sector of the market seems to have hit its “capitulation” stage where many people felt as though the downside would never end and they have sold out of their positions, adding to the plunge down.
Its funny that when people invest they see trends and extend them out forever. When they see a stock going up, they assume its going to keep going up for a long time at the same rate. And when it goes down, they assume its going to go down at the same rate for a long time (see my post about why mining stocks see such extreme lows for details).
These are great buying opportunities for a long-term counter-trend investor like me.
As happens, the volatility of these mining stocks is so high, they don’t bottom for long. I think we are going to see another big bump up in the near term.
Unfortunately I’m still swamped, but if I had time, I would do another update to my rebound trend charts to show that this next one is likely to be at least 60% from the bottom.
Long term, we are at a once in a lifetime buying opportunity, but again, you can’t just buy all in. You need to invest your portfolio in an intelligent and calculated way to be successful in the long run.
It will likely still be a few years before my this blog proves to be correct and I wish I had more time to go more in depth about my process, but I will ultimately discuss what I’ve done in the aftermath.
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