Friday, July 15, 2011

Sell low, buy lower?

9:31 am (Hawaii) It's no surprise that Extorre Gold Mines (XG) has sold lower today, a second session in a row of major decline. After hitting 15.42 on Wednesday, early in the session, it crashed on the greatest single-day volume of its short history. Today, XG is down 5.4% to 12.38 with a half-hour left. It dipped to a low of 12.00 even before bouncing, again on huge volume, though less than yesterday.

It's hard to say exactly when the fallout ends. On Tuesday, the company executed a secondary sale of 2.5 million shares, adding to its total of more than 80 million. It wasn't that the secondary was a surprise to most (it was to me!) or that the offering was at 10.50 (when the price of XG was 11.00). Shares were at the top end of their trading range and any excuse provided traders a chance to profit.

Volume hadn't been this big since April 19-21, when shares went from 7.80 to 10.08. My guess is that a majority of sellers yesterday and today bought in during this period. I just happened to buy at 14.25 two days ago. Had I kept the shares I bought at 11 or so, my mindset would be so different. I'd be happy to wait this decline out. My guess is that XG holds its ground at 12, perhaps 11.50, but no lower. But being down $2/share is not making a happy camper out of me. Yet, I'm willing to wait. It's a small position, but I hate losses, and I should've had a stop-loss order in. I'm not used to being down 14%. Fourteen frickin percent while 73% of my Metals list is green.

This is not the time to sell, however, not with gold pushing to all-time highs on both high and low volume days. Not with global debt crisis in our laps. Not with fiat currencies withering away. XG is a good company with a great PR team. I wouldn't be surprised to see XG's crew come back after the weekend with some new videos, perhaps the CEO talking about the importance of the secondary offering. It's a good problem when there's a mine that has better-than-expected potential, if that is really the case. It's not a massive offering, but enough to dig deeper, literally. Or wider.

And as I type, XG is rallying. Now at 12.51. Enormous volume, creeping toward yesterday's record. Sure, if I hadn't been asleep here in the islands while the sky was still dark, I could've sold XG for a profit on Wednesday. When I awoke, I could've sold roughly at break-even. But yesterday, I could've sold at 13+. Take the loss, move on, use the capital for another trade or just stay put.

But that was not the time to move in this trade. It was too late, and it's coming down to facts PLUS belief. Same with AAPL some time ago when I rode it from 215 to 192, never lost confidence, and shares eventually rose. (I sold at 257, much too soon.) So, a sell of XG at 15+ would've been ideal. A sell at 14+ would've been nice. Then buy back in at 12+ ... it appears. I'm not that good a trader, normally. I could double down here, but I'll leave it be.

After all, there's a weekend ahead, wacky things can happen as good stands up to evil. Just ask Harry and the gang. Can gold hold its gains? Will silver be whupped by the CME mafia? I plan to hold AGQ (up 7.1% today) and DGP (up 0.6%) over the weekend. The remainder of my trading roll will remain 50% cash.

AAPL has earnings out on the 19th. BIDU looks tasty. So does GSVC. I can stand holding AAPL for a stretch, but GSVC would probably give me as much stress as XG. Might hop in, though, for a tiny position. If tech continues to climb (thanks to Google's robust report yesterday), GSVC and its 3.34-million share float may squeeze more shorts.

Broad view, I tend agree with those who think default is off the table and the debt ceiling negotiations are all about posturing. But if shit does hit the fan at some point (Aug 2), I don't feel entirely comfortable with my stacks. I would need more of everything from physical metal to food to water to power. I can't believe I'm thinking about buying a generator, but if you were in Hawaii and somehow food and petroleum shipments were stalled for a month or two, what would you do?

Exactly. I hate to be unprepared.

The one aspect that does concern me technically is that most equities are trading on low to very low volume today. That's usually a precursor for a selloff, not necessarily a correction, but balance comes to the market eventually. That's why I hesitate to open more positions here. We may get better prices on Monday ... but if negotiations improve on Capitol Hill this weekend, the market will open much higher, and all the miners that were beaten to a pulp over the past few months will continue to slingshot higher.

Would the CME mafia dare to announce a margin hike late Sunday night? Think they might, but it's now 9:56 am and I have a small new position to start.

10:02 am (Hawaii) Tried to open a very small position in GSVC at 18.75, but only half the order was filled, so I'm left with a tiny position. Could be a blessing in disguise if there's a serious pullback on Monday, providing a better price. With its stake in Facebook, GSVC has mucho upside ahead. A week ago, after its second rip higher, I hoped for a pullback to 15.55. Never happened. Bad news over the weekend could give me that price.

No comments: