Trading notes - emailed to subscribers June 5th, 2002

A couple of points to pass on;

1) I hope with recent gold price movements, this has helped give illustrations to you of how most things really do move in cycles, both short and long term. Gold has spent years unloved, but it turns eventually. As it trends, you can see there are some months that stand out as more likely to be changes in trend than others. At such times, all the hype comes out; the top or bottom as the case may be. Gann clearly saw all this; it is where I learnt it. However, it is clear is it not, to really learn what to be doing at these times, you have to live thru it yourself. This is why I find Gann's book useful; he could not have written the books as he did without having traded thru such cyclic times himself. Thankfully he wrote down what he learnt.

2) To make a reasonable living from the market, you do not have to be smart intellectually. (Emotions are a different matter.) You just have to be able to stay long enough in the market to get enough experience to learn how it works. One of the things one has to learn, is, in effect, to unlearn everything we have previously learnt before becoming interested in the stock market. Here is an example of what I mean. Most people look for bargains. You just cannot do that in the market. So leaving aside the study of time for a moment, you will always do better:

- to buy high, and sell higher
- pick the right time to buy, across breakouts.

BMS is a good example of this. See the chart attached, bms.gif. This one I did not trade, having already been fully invested in other, mostly gold stocks. And as you know I prefer to use actual traded examples where I can; nevertheless it is a good example here of what I want to illustrate.

Breaks into new highs mean good news is coming, to justify the break in the first place. You don't have to read all that is written about a stock, you don't have to seek others opinions, you just need only watch the chart and act at the right time when the chart tells you. Never be in a hurry, otherwise you can bet the decision has some emotional attachment.

With BMS had you bought it, you have had some luck, a takeover offer. I find however, luck mostly goes your way when you are with the trend, not against it. For the same reason you have to think positive, and seek out others who do the same. Fortune favors the bold and positive thinkers.

3) Finally, it has been my observation that stocks go sideways more often than anything else. When they trend, and across breaks into new highs, it is time to get in. Then you have mostly the problem of when to sell. If you have this problem, take it as a good sign; it means you are learning a lot in the market, and buying the right stocks. We will look a bit more at this subject next.

do note, as the price of BMS went higher, the drawing of the chart on your screen takes on a different shape than how it looked the day of the break upwards.

Click here to see the file...

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