The Biggest Returns in These Stocks Are Likely Still Ahead of Us

In all likelihood, gold stocks are going to drop.

It will be sharp… And you need to be prepared.

If you’re not, you could miss out on some of the biggest gains of your life.

[ad#Google Adsense 336×280-IA]Consider this…

On October 27, 2008, gold stocks (as measured by the NYSE Arca Gold BUGS Index) bottomed. They shot 48% higher over the next week.

Folks who bought gold stocks that week saw shares tumble 25% over the next two weeks.

Disheartened, some of those folks – folks who miraculously caught a multiyear bottom within days – sold out.

Many would have taken losses.

Imagine how they felt when gold stocks soared 80% over the next month… and 280% over the next three years.

Did they get back into gold stocks just after their trading defeat? Would you have?

This is just an example. Every bull market is different. But they often begin with violent moves… to the upside and to the downside.

On January 19, 2016, gold stocks bottomed. They shot 78% higher over the next seven weeks. Folks who bought at any point over the last eight months – and held – are now sitting on big, exciting gains.

But there’s a good chance we’re now nearing – or in the early stages of – the first violent move to the downside. The warning comes in the form of the Gold Miners “Bullish Percent Index” (or “BPI”).

As Jeff Clark has explained, the BPI tracks the percentage of stocks in a sector that are trading in a bullish pattern. It ranges from zero to 100. The BPI flashes a buy signal when it reaches 30 or lower (oversold territory) and then turns higher. And it flashes a sell signal when it reaches 80 or higher (overbought territory) and then turns lower.

You can see the Gold BUGS Index (the black line) along with the Gold Miners BPI (the blue line) in the chart below. At the beginning of last week, the Gold Miners BPI was hovering at 72… then it turned lower. It’s not an official sell signal. But it’s still a warning sign.

The last time the Gold Miners BPI reached 72 and turned lower, in 2012, it marked the end of a big gold-stock rally… and the bear market continued.

I don’t know how big of a correction we’ll get this time. I’d be shocked if it were any less than 15%… And I wouldn’t be at all surprised if it tops 25%.

So how do you prepare?

You’ve already done the first thing. But you may want to go back and reread the beginning of this essay. This “visualization” – looking back at history and thinking about what it might be like to experience it – is a great way to prepare yourself mentally.

You know it can happen because it has happened.

The next way to prepare is by making sure you use appropriate stop losses on your gold stocks. In the event of a 25% or 35% correction, will you stop out of your trades? You need to allow for this expected volatility if you want to hold on to your positions. That’s why I recommended that you consider widening the trailing stops on your gold-stock positions last month.

Finally, make sure you have some cash ready. The biggest gains in gold stocks are likely still ahead of us. If you get another opportunity to buy at a big discount to today’s prices, I suggest you take it.


Ben Morris


Source: Growth Stock Wire